ECB and Christine Lagarde: the long shadow of Mario Draghi

AndMemories of Mario Draghi’s legendary appearance almost exactly ten years ago were awakened when the European Central Bank reported a meeting of its central bank council that had been called on short notice on Wednesday. As in the first euro crisis, bond yields in peripheral countries had previously risen sharply. And just as Hans-Werner Sinn, as president of the Ifo Institute, gave the Cassandra in the first euro crisis, his successor Clemens Fuest was quoted on Wednesday with a grim prognosis: “What is happening here is clear. : this is the return of the euro crisis “.

Is it that time again? It doesn’t seem safe. It is true that the thinking of the European Central Bank is still strongly influenced by Draghi’s mandate. And so Christine Lagarde is preparing to try to prevent the outbreak of a new euro crisis by means similar to those with which Draghi contained the first euro crisis since autumn 2012.

Lagarde’s problem is the dramatic change in the environment. When Draghi put eurozone stabilization at the heart of the European Central Bank’s actions, inflation did not play a significant role. The forecasts, also from Germany, that the expansionary policy in the wake of the great financial crisis of 2008/2009 would lead to high inflation had turned out to be wrong.

“And believe me, it will be enough”

Today, however, an inflation rate of around 8 per cent obliges an ECB, committed to its mandate, to focus its actions exclusively on restoring monetary stability. Attempts to stabilize the monetary union with methods à la Draghi could, at worst, even hinder the assurance of price level stability. However, the ECB is struggling to boldly step out of the shadow of its most powerful president to date, who still weighs heavily on it.

So it’s worth looking back. When Mario Draghi took part in a panel discussion at a high-level conference at London’s Lancaster House on 26 July 2012, heavy clouds loomed over the eurozone. The distrust of many investors regarding the creditworthiness of highly indebted euro member countries has raised serious doubts about the future viability of the European Monetary Union. The sharp rise in southern European government bond yields reflects fears of a collapse of the monetary union. All attempts by governments to restore confidence in the euro had failed.

When Draghi took the floor for a brief contribution to the London conference, he initially had little to offer his audience. Then, virtually seamlessly, the legendary words, which weren’t improvised at all but had been prepared for weeks, fell off after about seven minutes. You have long ago entered financial history: “I would like to send you another message today. In our mandate, in our mandate, the ECB is ready to do whatever it takes to preserve the euro. “After a brief artistic break, Draghi continued:” And believe me, that will be enough. “Among those present, not only Christine won Lagarde, who at the time attended the conference as Director General of the International Monetary Fund, spontaneously had the impression that Draghi’s rulings could have a lasting influence on the future of monetary union.

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