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European Central Bank
Logo of the European Central Bank European Central Bank headquarters
Headquarters	Frankfurt am Main, Hesse, Germany
Coordinates	50.1095°N 8.6740°E
Established	1 June 1998
President	Mario Draghi
Central bank of	Eurozone[show]
Currency	Euro
ISO 4217 Code	EUR
Reserves	526 billion euro in total[show]
Base borrowing rate	0.75%
Base deposit rate	0%
Website	www.ecb.int
Preceded by	17 national banks[show]

The European Central Bank (ECB) is the institution of the European Union (EU) that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world’s most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt am Main, Germany. The current President of the ECB is Mario Draghi, former governor of the Bank of Italy.

The primary objective of the European Central Bank is to maintain price stability within the Eurozone, which is the same as keeping inflation low. The Governing Council defined price stability as inflation (Harmonised Index of Consumer Prices) of around 2%. Unlike, for example, the United States Federal Reserve Bank, the ECB has only one primary objective with other objectives subordinate to it.

The key tasks of the ECB are to define and implement the monetary policy for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves of the European System of Central Banks and promote smooth operation of the financial market infrastructure under the TARGET2 payments system and the technical platform (currently being developed) for settlement of securities in Europe (TARGET2 Securities). Furthermore, it has the exclusive right to authorise the issuance of euro banknotes. Member states could issue euro coins, but the amount must be authorised by the ECB beforehand (upon the introduction of the euro, the ECB also had exclusive right to issue coins).

On 9 May 2010, the 27 member states of the European Union agreed to incorporate the European Financial Stability Facility. The EFSF’s mandate is to safeguard financial stability in Europe by providing financial assistance to Eurozone Member States.

The bank must also co-operate within the EU and internationally with third bodies and entities. Finally it contributes to maintaining a stable financial system and monitoring the banking sector. The latter can be seen, for example, in the bank’s intervention during the 2007 credit crisis when it loaned billions of euros to banks to stabilise the financial system.

Although the ECB is governed by European law directly and thus not by corporate law applying to private law companies, its set-up resembles that of a corporation in the sense that the ECB has shareholders and stock capital. Its capital is five billion euro which is held by the national central banks of the member states as shareholders. The initial capital allocation key was determined in 1998 on the basis of the states’ population and GDP, but the key is adjustable. Shares in the ECB are not transferable and cannot be used as collateral.

The bank is based in Frankfurt, the largest financial centre in the Eurozone (although not the largest in the European Union). Its location in the city is fixed by the Amsterdam Treaty along with other major institutions. In the city, the bank currently occupies Frankfurt’s Eurotower until its purpose-built headquarters are built.

The owners and shareholders of the European Central Bank are the central banks of the 27 member states of the EU. The ECB should not be confused with the European Investment Bank (EIB), the development bank owned by the EU member states.

History

The European Central Bank is the de facto successor of the European Monetary Institute (EMI).^[1] The EMI was established at the start of the second stage of the EU’s Economic and Monetary Union (EMU) to handle the transitional issues of states adopting the euro and prepare for the creation of the ECB and European System of Central Banks (ESCB).^[1] The EMI itself took over from the earlier European Monetary Co-operation Fund (EMCF).^[2]

Wim Duisenberg, first President of the ECB.

The ECB formally replaced the EMI on 1 June 1998 by virtue of the Treaty on European Union (TEU, Treaty of Maastricht), however it did not exercise its full powers until the introduction of the euro on 1 January 1999, signalling the third stage of EMU.^[1] The bank was the final institution needed for EMU, as outlined by the EMU reports of Pierre Werner and President Jacques Delors. It was established on 1 June 1998.^[3]

The first President of the Bank was Wim Duisenberg, the former president of the Dutch central bank and the European Monetary Institute.^[3] While Duisenberg had been the head of the EMI (taking over from Alexandre Lamfalussy of Belgium) just before the ECB came into existence,^[3] the French government wanted Jean-Claude Trichet, former head of the French central bank, to be the ECB’s first president.^[3]

The French argued that since the ECB was to be located in Germany, its President should be French. This was opposed by the German, Dutch and Belgian governments who saw Duisenberg as a guarantor of a strong euro.^[4] Tensions were abated by a gentleman’s agreement in which Duisenberg would stand down before the end of his mandate, to be replaced by Trichet, which occurred in November 2003.^[5]

There had also been tension over the ECB’s Executive Board, with the United Kingdom demanding a seat even though it had not joined the Single Currency.^[4] Under pressure from France, three seats were assigned to the largest members, France, Germany, and Italy; Spain also demanded and obtained a seat. Despite such a system of appointment the board asserted its independence early on in resisting calls for interest rates and future candidates to it.^[4]

When the ECB was created, it covered a Eurozone of eleven members. Since then, Greece joined in January 2001, Slovenia in January 2007, Cyprus and Malta in January 2008, Slovakia in January 2009, and Estonia in January 2011, enlarging the bank’s scope and the membership of its Governing Council.^[2]

On 1 December 2009, the Treaty of Lisbon entered into force, ECB according to the article 13 of TEU, gained official status of an EU institution.

In April 2011, the ECB raised interest rates for the first time since 2008 from 1% to 1.25%,^[6] with a further increase to 1.50% in July 2011.^[7]

In 2011, when German appointee to the Governing Council and Executive board, Jürgen Stark, resigned in protest of the ECB’s bond buying programme, Financial Times Deutschland called it “the end of the ECB as we know it” referring to its perceived “hawkish” stance on inflation and its historical Bundesbank influence.^[8]

Powers and objectives

Euro banknotes

The primary objective of the European Central Bank is to maintain price stability within the Eurozone, which is the same as keeping inflation low. The Governing Council in October 1998^[9] defined price stability as inflation of around 2%, “a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%” and added that price stability ”was to be maintained over the medium term”. (Harmonised Index of Consumer Prices)^[10] Unlike for example the United States Federal Reserve Bank, the ECB has only one primary objective with other objectives subordinate to it. The Governing Council confirmed this definition in May 2003 following a thorough evaluation of the ECB’s monetary policy strategy. On that occasion, the Governing Council clarified that “in the pursuit of price stability, it aims to maintain inflation rates below but close to 2% over the medium term”.^[9] All lending to credit institutions must be collateralised as required by Article 18 of the Statute of the ESCB.^[11]

Authorities

The key tasks of the ECB are to define and implement the monetary policy for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves of the European System of Central Banks and promote smooth operation of the financial market infrastructure under the TARGET2 payments system^[12] and being currently developed technical platform for settlement of securities in Europe (TARGET2 Securities). Furthermore, it has the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins but the amount must be authorised by the ECB beforehand (upon the introduction of the euro, the ECB also had exclusive right to issue coins).^[12]

In U.S. style central banking, liquidity is furnished to the economy primarily through the purchase of Treasury bonds by the Federal Reserve Bank. The Eurosystem uses a different method. There are about 1500 eligible banks which may bid for short term repo contracts of two weeks to three months duration.^[13]

The banks in effect borrow cash and must pay it back; the short durations allow interest rates to be adjusted continually. When the repo notes come due the participating banks bid again. An increase in the quantity of notes offered at auction allows an increase in liquidity in the economy. A decrease has the contrary effect. The contracts are carried on the asset side of the European Central Bank’s balance sheet and the resulting deposits in member banks are carried as a liability. In lay terms, the liability of the central bank is money, and an increase in deposits in member banks, carried as a liability by the central bank, means that more money has been put into the economy.^[14]

Mandates

To qualify for participation in the auctions, banks must be able to offer proof of appropriate collateral in the form of loans to other entities. These can be the public debt of member states, but a fairly wide range of private banking securities are also accepted.^[15] The fairly stringent membership requirements for the European Union, especially with regard to sovereign debt as a percentage of each member state’s gross domestic product, are designed to insure that assets offered to the bank as collateral are, at least in theory, all equally good, and all equally protected from the risk of inflation.^[15]

The economic and financial crisis that began in 2008 has revealed some relative weaknesses in the sovereign debt of such member countries as Portugal, Ireland, Greece and Spain.^[16] These securities are not limited to the countries of issue, but held in many cases by banks in other member states.^[15] To the extent that the banks authorised to borrow from the ECB have compromised collateral, their ability to borrow from the ECB—and thus the liquidity of the economic system—is impaired.^[15]

This threat has drawn the ECB into rescue operations.^[15] But weak sovereign debt is not the only source of weakness in the ECB’s operations, as the collapse of the market in U.S. dollar denominated collateralised debt obligations has also led to large scale interventions in cooperation with the Federal Reserve.^[15]

Rescue operations involving sovereign debt have included temporarily moving bad or weak assets off the balance sheets of the weak member banks into the balance sheets of the European Central Bank.^[17] Such action is viewed as monetisation and can be seen as an inflationary threat, whereby the strong member countries of the ECB shoulder the burden of monetary expansion (and potential inflation) in order to save the weak member countries.^[17] Most central banks prefer to move weak assets off their balance sheets with some kind of agreement as to how the debt will continue to be serviced.^[17] This preference has typically led the ECB to argue that the weaker member countries must:

• Allocate considerable national income to servicing debts.^[17]
• scale back a wide range of national expenditures (such as education, infrastructure, and welfare transfer payments) in order to make their payments.^[17]

Mario Draghi, the current President of the ECB.

European Financial Stability Facility

On 9 May 2010, the 27 member states of the European Union agreed to incorporate the European Financial Stability Facility.^[18] The EFSF’s mandate is to safeguard financial stability in Europe by providing financial assistance to Eurozone Member States.^[18]

The European Financial Stability Facility is authorised to use the following instruments linked to appropriate conditionality:

• To provide loans to countries in financial difficulties (e.g. Greek Bailout).^[18]
• To intervene in the primary and secondary debt markets. Intervention in the secondary debt market will be only on the basis of an ECB analysis recognising the existence of exceptional financial market circumstances and risks to financial stability.^[18]
• Act on the basis of a precautionary programme.^[18]
• Finance recapitalisations of financial institutions through loans to governments^[18]

The EFSF is backed by guarantee commitments from the Eurozone Member States for a total of €780 billion and has a lending capacity of €440 billion.^[18] It has been assigned the best possible credit rating (AAA by Standard & Poor’s and Fitch Ratings, Aaa by Moody’s)^[18]

Powers and objectives during the European banking crisis

ECB balance sheet

ECB deposit facility

Current accounts at the ECB

The European Central Bank had stepped up the buying of member nations debt.^[19] In response to the crisis of 2010, some proposals have surfaced for a collective European bond issue that would allow the central bank to purchase a European version of U.S. Treasury Bills.^[20][21] To make European sovereign debt assets more similar to a U.S. Treasury, a collective guarantee of the member states’ solvency would be necessary.^[22] But the German government has resisted this proposal, and other analyses indicate that “the sickness of the Euro” is due to the linkage between sovereign debt and failing national banking systems. If the European central bank were to deal directly with failing banking systems sovereign debt would not look as leveraged relative to national income in the financially weaker member states.^[21]

On 17 December 2010, the ECB announced that it was going to double its capitalisation.^[23] (The ECB’s most recent balance sheet before the announcement listed capital and reserves at €2.03 trillion.)^[24] The sixteen central banks of the member states would transfer assets to the ledger of the ECB.

In 2011, the European member states may need to raise as much as US$2 trillion in debt.^[23] Some of this will be new debt and some will be previous debt that is “rolled over” as older loans reach maturity. In either case, the ability to raise this money depends on the confidence of investors in the European financial system.^[24] The ability of the European Union to guarantee its members’ sovereign debt obligations have direct implications for the core assets of the banking system that support the Euro.^[23]

The bank must also co-operate within the EU and internationally with third bodies and entities. Finally it contributes to maintaining a stable financial system and monitoring the banking sector.^[25] The latter can be seen, for example, in the bank’s intervention during the 2007 credit crisis when it loaned billions of euros to banks to stabilise the financial system.^[26] In December 2007, the ECB decided in conjunction with the Federal Reserve under a program called Term auction facility to improve dollar liquidity in the eurozone and to stabilise the money market.^[27]

In late May 2012, looking ahead to further challenges with Greece, Bundesbank chief and ECB council member Jens Weidmann pointed out that the council could veto “emergency liquidity assistance” (ELA) to, for instance, Greece through a two–third majority of the council. If Greece chose to default on its debts yet wanted to stay in the Euro, the ELA would be one of the ways to accommodate the country’s and its banks’ liquidity needs or, alternatively, to precipitate departure.^[28]

Independence

Furthermore, not only must the bank not seek influence, but EU institutions and national governments are bound by the treaties to respect the ECB’s independence. For example, the minimum term of office for a national central bank governor is five years and members of the executive board have a non-renewable eight-year term.^[29] To offer some accountability, the ECB is bound to publish reports on its activities and has to address its annual report to the European Parliament, the European Commission, the Council of the European Union and the European Council.^[30] The European Parliament also gets to question and then issue its opinion on candidates to the executive board.^[31]

As result of pressure from France and Greece, independence of ECB has been limited.^[32]

Organisation

Although the ECB is governed by European law directly and thus not by corporate law applying to private law companies, its set-up resembles that of a corporation in the sense that the ECB has shareholders and stock capital. Its capital is five billion euros^[33] which is held by the national central banks of the member states as shareholders. The initial capital allocation key was determined in 1998 on the basis of the states’ population and GDP,^[34] but the key is adjustable.^[35] Shares in the ECB are not transferable and cannot be used as collateral.^[36]

European Union

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All National Central Banks (NCBs) that own a share of the ECB capital stock as of 1 January 2011 are listed below. Non-Euro area NCBs are required to pay up only a very small percentage of their subscribed capital, which accounts for the different magnitudes of Euro area and Non-Euro area total paid-up capital.^[37]

Decision-making bodies of the ECB

Jean-Claude Trichet, the second President of the European Central Bank.

The Governing Council comprises the members of the Executive Board of the ECB (6) and the governors of the NCBs of the euro area countries (17 as of 2012).

The Executive Board is responsible for the implementation of monetary policy defined by the Governing Council and the day-to-day running of the bank.^[38] In this it can issue decisions to national central banks and may also exercise powers delegated to it by the Governing Council.^[38] It is composed of the President of the Bank (currently Mario Draghi), a vice president (currently Vitor Constâncio) and four other members.^[38] They are all appointed for non-renewable terms of eight years.^[38] They are appointed “from among persons of recognised standing and professional experience in monetary or banking matters by common accord of the governments of the Member States at the level of Heads of State or Government, on a recommendation from the Council, after it has consulted the European Parliament and the Governing Council of the ECB”.^{[this quote needs a citation]} The Executive Board normally meets every Tuesday.

The General Council is a body dealing with transitional issues of euro adoption, for example fixing the exchange rates of currencies being replaced by the euro (continuing the tasks of the former EMI).^[38] It will continue to exist until all EU member states adopt the euro, at which point it will be dissolved.^[38] It is composed of the President and Vice President together with the governors of all of the EU’s national central banks.^[39][40]

José Manuel González-Páramo, a Spanish member of the Executive Board since June 2004, was due to leave the board in early June 2012 and no replacement had been named as of late May 2012.^[28] The Spanish had nominated Barcelona-born Antonio Sáinz de Vicuña, an ECB veteran who heads its legal department, as González-Páramo’s replacement as early as January 2012 but alternatives from Luxembourg, Finland, and Slovenia were put forward and no decision made by May.^[41]

European sovereign debt crisis

From late 2009, fears of a sovereign debt crisis developed among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010.^[42][43] This included euro zone members Greece,^[44] Ireland and Portugal and also some EU countries outside the area.^[45] Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed has emerged less affected by the sovereign debt crisis as the government refused to bail the banks out, and has begun to prosecute those involved in the collapse.^[46]

In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.^[47][48] To be included in the eurozone, the countries had to fulfill certain convergence criteria, but the meaningfulness of such criteria were diminished by the fact they have not been applied to different countries with the same strictness.^[49]

Causes

The principal monetary policy tool of the European central bank is collateralised borrowing or repo agreements.^[50] These tools are also used by the United States Federal Reserve Bank, but the Fed does more direct purchasing of financial assets than its European counterpart.^[51] The collateral used by the ECB is typically high quality public and private sector debt.^[50]

The criteria for determining “high quality” for public debt have been preconditions for membership in the European Union: total debt must not be too large in relation to Gross Domestic Product, for example, and deficits in any given year must not become too large.^[52] Though these criteria are fairly simple, a number of accounting techniques may hide the underlying reality of fiscal solvency—or the lack of same.^[52]

In central banking, the privileged status of the central bank is that it can make as much money as it deems needed.^[53] In the United States Federal Reserve Bank, the Federal Reserve buys assets: typically, bonds issued by the Federal government.^[53] There is no limit on the bonds that it can buy and one of the tools at its disposal in a financial crisis is take such extraordinary measures as the purchase of large amounts of assets such as commercial paper.^[53] The purpose of such operations is to ensure that adequate liquidity is available for functioning of the financial system.^[53]

Regulatory reliance on credit ratings

Think-tanks such as the World Pensions Council have also argued that European legislators have pushed somewhat dogmatically for the adoption of the Basel II recommendations, adopted in 2005, transposed in European Union law through the Capital Requirements Directive (CRD), effective since 2008. In essence, they forced European banks, and, more importantly, the European Central Bank itself e.g. when gauging the solvency of financial institutions, to rely more than ever on standardised assessments of credit risk marketed by two non-European private agencies- Moody’s and S&P.

Response to the crisis

There are a variety of possible responses to the problem of bad debts in a banking system. One is to induce debtors to make a greater effort to make good on their debt.^[50] With public debt this usually means getting governments to maintain debt payments while cutting back on other forms of expenditure.^[50] Such policies often involve cutting back on popular social programs.^[54]

Stringent policies with regard to social expenditures and employment in the state sector have led to riots and political protests in Greece.^[55] Another response is to shift losses from the central bank to private investors who are asked to “share the pain” of partial defaults that take the form of rescheduling debt payments.^[50]

However, if the debt rescheduling causes losses on loans held by European banks, it weakens the private banking system, which then puts pressure on the central bank to come to the aid of those banks. Private sector bond holders are an integral part of the public and private banking system. Another possible response is for wealthy member countries to guarantee or purchase the debt of countries that have defaulted or are likely to default.^[50] This alternative requires that the tax revenues and credit of the wealthy member countries be used to refinance the previous borrowing of the weaker member countries, and is politically controversial.^[56]

Reluctance in Germany to take on the burden of financing or guaranteeing the debts of weaker countries has led to public reports that some elites in Germany would prefer to see Greece, Portugal, and even Italy leave the Euro zone “temporarily.”^[57] Until recently, Greek Euro zone exit was rejected by German Chancellor Angela Merkel.^[58] The German government’s current position is, to keep Greece within the euro zone, but not at any cost. If the worst comes to the worst, priority will be given to the euro’s stability.^[59]

Bond purchase

ECB Securities Markets Program (SMP) covering bond purchases since May 2010

The ECB could, and through the late summer of 2011 did, purchase bonds issued by the weaker states even though it assumes, in doing so, the risk of a deteriorating balance sheet. ECB buying focused primarily on Spanish and Italian debt.^[60] Certain techniques can minimize the impact. Purchases of Italian bonds by the central bank, for example, were intended to dampen international speculation and strengthen portfolios in the private sector and also the central bank.^[61]

The assumption is that speculative activity will decrease over time and the value of the assets increase. Such a move is similar to what the U.S. federal reserve did in buying subprime mortgages in the crisis of 2008, except in the European crisis, the purchases are of member state debt. The risk of such a move is that it could diminish the value of the currency.^[52]

On the other hand, certain financial techniques can reduce the impact of such purchases on the currency.^[52] One is sterilisation, wherein highly valued assets are sold at the same time that the weaker assets are purchased, which keeps the money supply neutral.^[52] Another technique is simply to accept the bad assets as long-term collateral (as opposed to short-term repo swaps) to be held until their market value stabilizes. This would imply, as a quid pro quo, adjustments in taxation and expenditure in the economies of the weaker states to improve the perceived value of the assets.^[52]

When the ECB buys bonds from other creditors such as European banks, the ECB does not disclose the transaction prices. Creditors profit of bargains with bonds sold at prices that exceed market’s quotes.

On 6 September 2012, the ECB announced a new plan for buying bonds from eurozone countries.^[62]

Long term refinancing operation

Though the ECB’s main refinancing operations (MRO) are from repo auctions with a (bi)weekly maturity and monthly maturation, the ECB now conducts Long Term Refinancing Operations (LTROs), maturing after three months, six months, 12 months and 36 months.

In 2003, refinancing via LTROs amounted to 45 bln Euro which is about 20% of overall liquidity provided by the ECB.^[63]

The ECB’s first supplementary longer-term refinancing operation (LTRO) with a six-month maturity was announced March 2008.^[64] Previously the longest tender offered was three months. It announced two 3-month and one 6-month full allotment of Long Term Refinancing Operations (LTROs). The first tender was settled 3 April, and was more than four times oversubscribed. The €25 billion auction drew bids amounting to €103.1 billion, from 177 banks. Another six-month tender was allotted on 9 July, again to the amount of €25 billion.^[64]

The first 12 month LTRO in June 2009 had close to 1100 bidders.^[65]

On 21 December 2011 the bank instituted a programme of making low-interest loans with a term of 3 years (36 months) and 1% interest to European banks accepting loans from the portfolio of the banks as collateral. Loans totalling €489.2 billion ($640 billion) were announced. The loans were not offered to European states, but government securities issued by European states would be acceptable collateral as would mortgage securities and other commercial paper that can be demonstrated to be secure. The programme was announced on 8 December 2011 but observers were surprised by the volume of the loans made when it was implemented.^[66][67][68] Under its LTRO it loaned €489 billion to 523 banks for an exceptionally long period of three years at a rate of just one percent.^[69] The by far biggest amount of €325 billion was tapped by banks in Greece, Ireland, Italy and Spain.^[70] This way the ECB tried to make sure that banks have enough cash to pay off €200 billion of their own maturing debts in the first three months of 2012, and at the same time keep operating and loaning to businesses so that a credit crunch does not choke off economic growth. It also hoped that banks would use some of the money to buy government bonds, effectively easing the debt crisis.^[71]

On 29 February 2012, the ECB held a second 36 month auction, LTRO2, providing eurozone banks with further €529.5 billion in low-interest loans.^[72] This second long term refinancing operation auction saw 800 banks take part. This can be compared with the 523 banks that took part in the first auction on 21 December 2011.^[73] Net new borrowing under the February auction was around €313 billion – out of a total of €256bn existing ECB lending €215bn was rolled into LTRO2.^[73]

Foreign exchange operations

On 22 September 2000, the ECB, together with the monetary authorities of the United States, Japan, the United Kingdom and Canada, initiated concerted intervention in the foreign exchange markets; the ECB intervened again in early November 2000.^[74]

Location

Model of the ECB’s new headquarters, which is due to be completed in 2014.

The bank is based in Frankfurt, the largest financial centre in the Eurozone. Its location in the city is fixed by the Amsterdam Treaty along with other major institutions.^[75] In the city, the bank currently occupies Frankfurt’s Eurotower until its purpose-built headquarters are built.^[76]

In 1999 an international architectural competition was launched by the bank to design a new building.^[77] It was won by a Vienna-based architectural office named Coop Himmelbau.^[77] The building will be approximately 180 metres (591 ft) tall (the present building is 148 m/486 ft high.) and will be accompanied with other secondary buildings on a landscaped site on the site of the former wholesale market in the eastern part of Frankfurt am Main. The main construction began in October 2008, with completion scheduled during 2014.^[77][78] It is expected that the building will become an architectural symbol for Europe and is designed to accommodate double the number of staff who operate in the Eurotower.^[76]

See also

Numismatics portal

• European Banking Authority
• European Systemic Risk Board
• Open market operations

References

External links

Wikimedia Commons has media related to: European Central Bank

	Book: European Union
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Wikisourcehas original text related to this article: Protocol on the Statute of the ESCB and ECB

• European Central Bank, official website.
• Central Bank Rates, Europe Interest Rates data and chart
• New ECB Premises, official website.
• The European Central Bank, European NAvigator.
• European Central Bank: history, role and functions, ECB website.
• Infocheese: ECB
• forex-history.net, historical currency charts based on the data published daily by the ECB.

• 1998 establishments in the European Union
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• European System of Central Banks
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Euro Maestro

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11:08 AM  -  Public

The European Central Bank to the rescue!#eurocrisis   #eurozonecrisis   #eurozone   #euromaestroThe European Central Bank (ECB) has announced that it will engage in outright monetary transactions, or OMTs, to address “severe distortions” in government bond markets based on “unfounded fears”.

The ECB aims to cut the borrowing costs of debt-burdened eurozone members by buying their bonds.

The maturities of the bonds being purchased would be between one and three years and there would be no limits on the size of bond purchases, he added.

The ECB expects the eurozone economy to shrink by 0.4% in 2012 and grow by 0.5% in 2013, with inflation rising to 2.6%.

Jens Weidmann, president of Germany’s Bundesbank, remains vigorously opposed to the ECB’s plan, concerned that member states could become hooked on central bank aid and fail to reform their economies sufficiently.

But the majority of the 23 ECB council members support the plan.

And the Organization for Economic Co-operation and Development (OECD) added its support for the ECB bond-buying plan on Thursday, as it warned that the eurozone crisis posed the greatest risk to the global economy.

It is calling for more action from central banks to prevent a break-up of the eurozone.

Eurozone AAA credit rating at risk
https://plus.google.com/u/0/107040353898400532534/posts/aEewv7uR75G

Merkel’s solution to Euro Crisis – political union ?
https://plus.google.com/u/0/107040353898400532534/posts/M2ADN7HkKc9

Is this enough to allay the concerns in the financial community or is this too little, too late ?

Draghi in ECB euro rescue plan »

Mario Draghi, president of the European Central Bank, has unveiled details of a new bond-buying plan aimed at easing the eurozone debt crisis.

3

+17

26 comments

Randy Hilarski11:09 AM

+2

More money printing equals higher inflation equals higher food costs means a hidden tax.

ARTEMIS Dimou11:10 AM

+1

VERY INTERESTING .MARKETS RESPONDED IN A POSITIVE WAY.

Catherine Maguire11:11 AM

+1

Doesn’t higher inflation (within sensible levels) means shrinkage of debt?

Viv Collins11:13 AM

+2

This was always going to happen and was just waiting for a time when it could, expect the rest of the deal to come a bit later in the form of tighter central bank integration

Euro Maestro11:15 AM

+2

+Viv Collins Totally agree that this was inevitable.  I’ve been predicting this for some time.  The integration will need to go a lot deeper.

tom gross11:16 AM

+3

+Catherine Maguire I agree, and I think that inflation must be the inevitable long term solution to several decades of profligate spending.  I was going to add “and irresponsible governments”, but that is the problem.  The governments remain irresponsible, so a strong bout of inflation is the only remedial action that will clean off the debt.  Just think of inflation as a currency devaluation which is in effect paying off the debt by reducing the “wealth” of a nation.

Randy Hilarski11:17 AM

+1

If you want Swiss Valcambi Gold and Silver to protect your buying power let me know.

Euro Maestro11:19 AM

+1

+Randy Hilarski But the bond buying by the bank doesn’t result in more money being printed.   The effect is simply to lower the rate at which the bonds are sold.  Thereby reducing government expeditures.

Randy Hilarski11:28 AM

+1

You are right +Euro Maestro as you know over 95% of all money today is just digital. I listened to the whole interview this am and it sounds like quantitative easing to me. #Silver and #Gold exploded to the upside.

Euro Maestro11:30 AM

+1

+Randy Hilarski Exactly what I predicted a week ago.  That the ECB would start quantitative easing along the lines of the Federal Reserve Bank for the US.  Both Washington and the OECD has been pressuring for this along with other efforts at stimulus !

Catherine Maguire11:42 AM

+2

Thanks for the succinct explanation +tom gross that makes sense to me. Though I thought it was the banks and markets who got us into this mess rather than years of overspending by governments.

Matthew Olney11:46 AM

+1

It will only save the Euro if Draghi can convince the Germans to lessen the yoke of austerity.  Keynes advocated spending your way out of a recession because austerity makes the recession worse, lets hope this action isn’t to late for Europe’s sake and to lessen the impact on the UK.

Euro Maestro11:46 AM

+1

+Catherine Maguire The banks and markets were responsible for the last global financial crisis.  The debt levels of certain governments have put them at a particularly acute risk given this environment.  Although European level debts are well below those of the US and Japan, the EU currently lacks the mechanicsms that those countries have to deal with market created issues.  The ECB being able to buy bonds directly in the market is one of the first steps to give the ECB some of the powers it needs to prevent a crisis from deepening.

Euro Maestro11:47 AM

+Matthew Olney That has been Washington’s and the OECD’s argument as well.

Matthew Olney11:49 AM

+1

Its common sense really, how else can you get things growing again unless you splash the cash, cutbacks and austerity kill any chance of this happening and would leave Europe in the doo doo for years to come.

Euro Maestro11:52 AM

+Matthew Olney Yes, +Paul Krugman has been making the same argument as well.  Essentially the austerity measures deepen the recession and make it even more difficult to reduce the burden of debt as the economy continues to shrink further.   While defecit reduction can make sense over the long term, the timing is key, and the middle of the recession is not the time to make drastic cuts to demand.

Matthew Olney11:53 AM

+1

the big question is also of course is it too late for Greece and Spain…

Euro Maestro11:58 AM

+Matthew Olney Great question.  Seems like Europe is doing all it can to save Spain.  Even allowing the bailout of Spanish banks not to appear on the books of the Spanish government.While there has been tremendous support for Greece to date, Europe has not been to shy to make it clear that they are prepared to throw Greece under the bus if they need to.

Mark Wolfskehl12:39 PM

+1

Sounds like the Eurozone may be considering giving the dollar some competition on its way to the bottom of the value heap.

Warren Dew3:38 PM (edited)

+1

+Randy Hilarski +Euro Maestro The bond purchases, if made, will be “sterilized” by other reductions in the money supply.  Of course, the effect of that is to constrain lending to the private sector and other governments.  Essentially it is a form of subsidization using an indirect tax on borrowers.

Warren Dew3:41 PM

+1

+Matthew Olney While Keynes personally advocated spending out of recessions, his actual economic theories support use of any type of deficit.  Historical data indicates that deficits through increased spending are ineffective, and that only deficits through decreased tax rates are effective.

Euro Maestro3:51 PM

+Warren Dew Which historical data are you talking about ?

Euro Maestro3:52 PM

+1

+Mark Wolfskehl Austerity measures haven’t helped out Greece so far yet.

Warren Dew3:56 PM

+1

+Euro MaestroI have a fuller discussion here:http://psychohist.livejournal.com/67326.htmlIt’s U.S. data, though.  Would be interesting to see data from other countries.

Euro Maestro4:12 PM

+Warren Dew I’ve read that.  The analysis looks totally flawed.The graph at the bottom has the following title.U.S. per capita GDP, 1871-2009; contrast the effects of demand side stimulus in the 1930s with supply side stimulus in the 1960s and 1980s:

I’m not sure what supply side stimulus you are talking about since the national debt tripled under Reagan years.  The United States went from the being the world’s largest creditor nation to becoming the world’s largest debtor nation during his two terms in office.

This graph seems to ascribe that growth in the 80s to supply side stimulus presumably because of the tax cuts made during the 80s.

Why shouldn’t it be described to demand side stimulus given the huge increases in federal spending and debt ?

Sid Harth4:20 PMEdit

S&P 500 reports at the highest level in nearly six months.Stop blabbering.…and I am Sid Harth@webworldismyoyster.com

Add a comment…

 

• 

Europe’s bank promises to rescue ailing economies, but with strings

European Central Bank President Mario Draghi announced that the ECB would buy the bonds of ailing eurozone nations. But the plan’s success turns on conditions that have yet to be spelled out.

By Robert Marquand, Staff writer / September 6, 2012

• 

The European Central Bank (ECB) President Mario Draghi speaks during the monthly news conference in Frankfurt on Thursday.

Alex Domanski/Reuters

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Paris

Whether Mario Draghi can save the euro is unclear. But the president of the European Central Bank seems to be rallying to the cause.

• 

  In Pictures: Europe in Crisis

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  What would happen if Greece exited the eurozone?

• Europe’s financial crisis: Waiting for ECB to ride to the rescue
• ECB’s Draghi said to push unlimited bond buying

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Today in an announcement watched around Europe and the world he said the ECB is ready to buy in “unlimited” quantities the bonds of ailing eurozone nations, though subject to a “conditionality” that remains to be spelled out.

Saying that Europe’s overall economy is expected to shrink for at least another year, Mr. Draghi said the ECB plan should give eurozone nations in crisis time to put their houses in order.

What would happen if Greece exited the eurozone?

The announcement followed a key meeting of the bank’s governing council in Frankfurt, and was taken as good news in Greece, Spain, and Italy, now reeling under debt in the most significant financial crisis here in decades.

Draghi reaffirmed the commitment of the council to Europe’s single currency at a time when markets are pushing heavier borrowing costs on ailing nations in anticipation that they may default or leave the eurozone.

The affable and unelected chief banker has found himself in the midst of what has become not just an economic crisis, but a widening political crisis over whether Europe, the EU, and the eurozone can hang together.

Yet the summer has been a somewhat tranquil period here with fewer euro crisis headlines, and the ECB would like to keep it that way, even as Greece and Spain face high unemployment and drastically reduced government spending.

Draghi repeated nearly verbatim his now famous statement from last summer that “we will do whatever it takes, within our mandate to… preserve the euro… we say the euro is irreversible.” 

The ECB’s direction under Draghi has been contested around Europe, mainly from northern states and Germany, where recent polls showed his unpopularity rating at 42 percent.

Yet in a nod to Germany, which fears the ECB will become an irresponsible money printing machine, the buying of one- to three-year bonds will be tied to what Draghi stressed as the linchpin of the plan: “conditionality.” Draghi said the bond plan is a “fully effective backstop” – provided nations live up to the terms of the deal he stated.

That “most of the ECB is supporting this is positive, and it isolates Germany further,” says Simon Tilford, chief economist of the Center for European Reform in London. “But there are fears that the conditions attached to the bond buying will make it impossible [for debtor nations] to meet the terms. Tighter demands for austerity at a time of high unemployment may not be possible.”

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Big rally on Wall Street

By Hibah Yousuf @CNNMoneyInvestSeptember 6, 2012: 4:13 PM ET

Click the chart for more stock market data.

NEW YORK (CNNMoney) — U.S. stocks surged Thursday, with all three major indexes closing at the highest levels in years, as optimistic investors went on a buying spree.

A combination of stronger-than-expected data on the job market and the European Central Bank’s bond-buying program provided the momentum, but it remains to be seen whether that can last.

The Dow Jones industrial average surged 245 points, or 1.9%, and closed at the highest level since December 2007. The S&P 500 climbed 2% to its highest level since January 2008 while the Nasdaq shot up 2.2% to its highest level since November 2000.

The advance was broad, with all 30 components of the Dow finishing higher. Bank stocks led the gains on the blue-chip index, with shares of Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) soaring more than 4%. About 98% of the S&P 500 finished in positive territory.

Speaking after a meeting of top ECB officials in Frankfurt, the central bank’s president, Mario Draghi, reiterated his pledge to do “whatever it takes” to preserve the euro and said the ECB is prepared to make “outright monetary transactions,” or OMTs, in the secondary market for euro-area government bonds.

The move is aimed at Spain and Italy, which struggled with unsustainable borrowing costs earlier this year, but will be available to all euro nations.

Related: ECB outlines bond-buying program

“The news out of Europe is boosting the market,” said Jack Ablin, chief investment officer at Harris Private Bank. “It seems like investors were skeptical of the ECB being able to pull off unlimited bond buying authority, so that’s really helping.”

The ECB also left interest rates unchanged at 0.75% and lowered its outlook for economic growth in 2012.

On the domestic front, a handful of reports on unemployment and hiring showed an improvement in the job market. The latest week of jobless claims fell by more than economists had forecast, while companies expanded their payrolls more than expected in July.

Investors hope Thursday’s data is a preview of what the U.S. employment picture looks like with Friday’s monthly jobs report.

“We’ve been seeing incremental improvement in the U.S. economy, and it would be great to get two strong jobs numbers in a row,” said Ablin.

Fear & Greed Index

The government is expected to report Friday that employers added 120,000 jobs in August, according to economists surveyed by CNNMoney. Investors will be paying especially close attention to the figure, since it will likely influence the Federal Reserve’s decision on whether to announce more quantitative easing at the conclusion of its next meeting on Sept. 12-13.

World Markets: European stocks finished sharply higher. Britain’s FTSE 100 added 2.1%, the DAX in Germany rose 2.9% and France’s CAC 40 gained 3.1%.

Second-quarter growth in the euro area decreased by 0.2% compared with the previous quarter, according to estimates released by Eurostat on Thursday. GDP for the eurozone was 0.5% lower than the same quarter last year.

Related: Chinese make 25% of world’s luxury buys

Asian markets closed higher Thursday. The Shanghai Composite edged up 0.7% and the Hang Seng in Hong Kong added 0.3%, while Japan’s Nikkei ended slightly above breakeven.

Economy: Employment in the U.S. non-farm private sector increased by 201,000 from July to August, according to ADP’s National Employment Report. The estimated gain from June to July was revised up, from the initial estimate of 163,000 to 173,000.

The numbers blew past expectations, as economists surveyed by Briefing.com had forecast an increase of 143,000 jobs.

Another upbeat report showed that jobless claims decreased to 365,000 during the week ending in Sept. 1, down 12,000 from the previous week’s revised figure of 377,000, according to the Labor Department. Economists surveyed by Briefing.com had expected claims to come in at 373,000.

These jobs numbers follow a report from outplacement firm Challenger, Gray & Christmas, which showed more than 32,000 planned job cuts in August — fewer layoffs than were announced in July.

The Institute for Supply Management said its index of activity in the service sector increased to 53.7 in August from 52.6 in July. The index was expected to come in at 52.4, according to a survey of analysts by Briefing.com.

Companies: Amazon (AMZN, Fortune 500) unveiled a new front-lit Kindle e-reader Thursday afternoon. The device, called the Paperwhite, will sell for $119 and will ship Oct. 1. The Paperwhite with 3G capabilities will sell for $179. The company also dropped the price of its low-end Kindle to $69 from $79.

Shares of Walgreen (WAG, Fortune 500) were lower after the company reported disappointing August sales.

Currencies and commodities: The dollar edged lower against the euro and the British pound, but rose versus the Japanese yen.

Oil for October rose 17 cents to settle at $95.53 a barrel.

Gold futures for December delivery gained $11.60 to settle at $1,705.60 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.66% from 1.59% late Wednesday.

First Published: September 6, 2012: 9:44 AM ET

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Around the Web

• Why Housing Prices Can’t Rise in the Long Term Profit Confidential
• How Google+ Can Overtake Facebook in Social Commerce in 3 Steps YoniAssia Blog
• Sept. 4: The Simple Case for Why Obama Is the Favorite The New York Times

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• David90038, 2 minutes ago The republicans will be rolling over in their graves, but first we have to put them there.

• Praxit, 10 minutes ago This reminds me of Nazi propaganda. Or is history repeating itself in a more cunning way.

• CaptTruth, 5 minutes ago in reply to Praxit It always does, with subtle nuances.

• SumoVita, 14 minutes ago Oh dear. The Dow’s headed towards 14,000 – I think the republican plan is to hope people can’t count.. at least, the fools that vote for them.

  1 person liked this.

• DreWhite, 11 minutes ago in reply to SumoVita Wait until inflation kicks in at a consumer level.

• TurpGriswald, 2 minutes ago in reply to DreWhite Inflation is always a concern. There are pressures both ways. Inflation in certain areas of the economy might not be a bad thing. But housing is pretty flat, and likely to stay that way for some years. That’s a big indicator in the inflation equation.

• lawoman32, 17 minutes ago Just as anecdotal information, a friend in Illinois tells me that John Deere has seen such a surge in business that they’re busy hiring new workers–these are good paying union jobs. I hope the trend continues.

  1 person liked this.

• olepi, 18 minutes ago Lemme see, 4 years ago the Dow was about 6,000, today its about 13,000. Is 13,000 > 6,000?

  gsquare77 and 3 more liked this

• TurpGriswald, 4 minutes ago in reply to olepi 8000, I believe. Still, it’s nice to see it rising like it used to. It’s interesting to plot stock market performance against the party in the white house.

• olepi, 20 minutes ago Yikes! Is there still time for the GOP to force our government into default? If not, they’d better hope the GOP voter suppression drive does the trick.

  SumoVita and 3 more liked this

• CaptTruth, 22 minutes ago Some folks have made great money in the markets, and I’m happy for them. Some have lost a great deal of their savings, and purchasing power due to money/credit creation, and I feel very sorry for them. The one constant in all of this, is the fact that EVERYONE is being played for a fool, believing that affiliation with one political party or the the other, makes a difference. Both candidates… show more

  3 people liked this.

• David Holmes, 2 minutes ago in reply to CaptTruth I’m afraid you battling ignorance borne out of hundreds of years of conditioning. Orwell new this was going to happen. Don’t let things are cannot change anger or upset you. Think what would happen if too many people knew the truth. Maybe it’s for the best the masses sleep-walk into disaster.

• martiniano, 23 minutes ago Nice – well done Obama! I remember very clearly where we were 4 years ago and Obama has done an outstanding job of pulling us from the brink of collapse.

  lawoman32 and 3 more liked this

• tiredoftrash, 25 minutes ago S&P at it’s highest level since May 2007??? Wait, this economy is just supposed to be horrible – I thought Pres. Obama ruined the country and pushed everyone into poverty. Nasdaq at its highest level since 2000??? Can’t be.

  SumoVita and 4 more liked this

• Dave711, 26 minutes ago Sad day for the GOP….a great DNC convention and, oh, no, things look better for the economy. Oh my, it’s a disaster!

  lawoman32 and 3 more liked this

• martiniano, 21 minutes ago in reply to Dave711 Dave, the GOP won’t be able to process this information as anything other than bad. They are like the stiffnecked people who gave Moses so much grief – they cannot see anything they don’t want to see.

  lawoman32 and 2 more liked this

• bigbiz2, 30 minutes ago LIARS>>It surged because of Europe ..not the dismal jobs in the US>>Gimme a break..

  2 people liked this.

• SumoVita, 12 minutes ago in reply to bigbiz2 Riiight. All those AMERICAN investors are investing in AMERICAN stock as reflected in the AMERICAN stock market because, like lyin’ Ryan, they think the economy is about to go down the tubes. Right.

• Val Gabr, 35 minutes ago Уeah, right and then one month later they will again say those numbers in early September were not totally true, how many times this happened last two years? Many, is this good timing for DNC thing?? Yeah, you bet…it’s BS and you will see it later this year.

  1 person liked this.

• mujihum, 36 minutes ago Wow !!!! ‘Stocks Soar on Hopes for Europe’. Where have I heard that stupidity before? Hmmmmm ??? Any different than the previous 300 similar “Soarings on Hopes for Europe” !!!!!!!! Nice try CNN.

  2 people liked this.

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Jobs picture brightens		1,865
Big rally on Wall Street		181
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Amazon unveils Kindle Fire HD, but sales will remain a mystery		5
Google to Apple: Get off our lawn!		49

Markets

• US Indexes
• Market Movers

Index	Last	Change	% Change
Dow	13,292.00	244.52	1.87%
Nasdaq	3,135.81	66.54	2.17%
S&P 500	1,432.12	28.68	2.04%
Treasuries	1.67	0.08	4.96%

Data as of 4:24pm ET

 

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2012 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones Indexes^SM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones Indexes^SM © 2012 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2012. All rights reserved. Most stock quote data provided by BATS.

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Mario Draghi

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Mario Draghi
President of the European Central Bank
Incumbent
Assumed office 1 November 2011
Vice President	Vítor Constâncio
Preceded by	Jean-Claude Trichet
Governor of the Bank of Italy
In office 16 January 2006 – 31 October 2011
Preceded by	Antonio Fazio
Succeeded by	Ignazio Visco
Chairperson of the Financial Stability Board
In office 2 April 2009 – 4 November 2011
Preceded by	Position established
Succeeded by	Mark Carney
Personal details
Born	3 September 1947 (age 65) Rome, Italy
Alma mater	Sapienza University of Rome Massachusetts Institute of Technology
Signature

Mario Draghi (Italian pronunciation: [ˈmaːrjo ˈdraːɡi]; born 3 September 1947) is an Italian banker and economist who succeeded Jean-Claude Trichet as President of the European Central Bank on 1 November 2011.^[1] He was previously the governor of the Bank of Italy from January 2006 until October 2011.

Contents 1 Background 2 ECB 2.1 Candidacy 2.2 Presidency 3 Awards and honors 4 References 5 External links

Background

He was born in Rome, where he studied at the Massimiliano Massimo Institute ^[2] and graduated from La Sapienza University under the supervision of Federico Caffè. Then he earned a PhD in economics from the Massachusetts Institute of Technology in 1976 under the supervision of Franco Modigliani and Robert Solow. He was full professor at the Cesare Alfieri Faculty of Political Science of the University of Florence from 1981 until 1994^[3] and fellow of the Institute of Politics at the John F. Kennedy School of Government, Harvard University (2001).

From 1984 to 1990 he was the Italian Executive Director at the World Bank. In 1991, he became director general of the Italian Treasury, and held this office until 2001. During his time at the Treasury, he chaired the committee that revised Italian corporate and financial legislation and drafted the law that governs Italian financial markets. He is also a former board member of several banks and corporations (Eni, Istituto per la Ricostruzione Industriale,^[4] Banca Nazionale del Lavoro and IMI).

In 2008, former Italian president Francesco Cossiga called him “a craven moneyman”.^[5] He is also known in Italy by the nickname of “Mr. Britannia”, due to a controversial meeting on board of HMY Britannia on June 2, 1992.^[6]

Draghi was then vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005).^[7]

Draghi is a trustee at the Institute for Advanced Study in Princeton, New Jersey and also at the Brookings Institution, in Washington, D.C.

In his capacity as Bank of Italy governor, he was a member of the Governing and General Councils of the European Central Bank and a member of the Board of Directors of the Bank for International Settlements. He is also governor for Italy on the Boards of Governors of the International Bank for Reconstruction and Development and the Asian Development Bank. In April 2006 he was elected Chairman of the Financial Stability Forum, which became Financial Stability Board in spring 2009.

ECB

Candidacy

Draghi was frequently mentioned as a potential successor to Jean-Claude Trichet, whose term as President of the European Central Bank ended in October 2011.^[8] Then, in January 2011, German weekly newspaper Die Zeit reported, with reference to high-ranking policy-makers in Germany and France, that it is “unlikely” that Draghi will be picked as Trichet’s successor.^[9] However, in February 2011 the situation became further complicated when the main German candidate, Axel Weber, was reported to be no longer seeking the job, reviving the chances of the other candidates.^[10] On 13 February 2011 Wolfgang Münchau, associate editor of the Financial Times, endorsed Draghi as the best candidate for the position.^[11] A few days later The Economist wrote that “the next president of the world’s second-most-important central bank should be Mario Draghi”.^[12] On 20 April 2011 The Wall Street Journal reported that “Wolfgang Schäuble, Germany’s finance minister, is open to Mr. Draghi for the post of ECB President”.^[13] A few days later the German newspaper Bild endorsed Draghi by defining him the “most German of all remaining candidates”.^[14] Contrary to previous reports about France’s position, on 25 April it was reported that President Nicolas Sarkozy saw Draghi as a full-fledged and an adequate candidate for the job.^[15][16]

On 17 May 2011 the Council of the European Union – sitting as Ecofin – adopted a recommendation on the nomination of Draghi as President of the ECB.^[17] He was approved by the European Parliament and the ECB itself^[18] and on 24 June 2011 his appointment was confirmed by the European leaders.^[19] Draghi began leading the Frankfurt-based institution when Trichet’s non-renewable eight-year term expired on 31 October 2011. Draghi’s term runs from 1 November 2011 to 31 October 2019.^[20] Though France long backed Draghi’s candidacy, the country held up the appointment toward the end, insisting that Lorenzo Bini Smaghi, an Italian official on the ECB’s six-member board, cede his post on the board to a French representative.^[19]

Concerns were also expressed during the candidacy about Draghi’s past employment at Goldman Sachs.^[7][21] Pascal Canfin (MEP) asserted Draghi was involved in swaps for European governments, particularly in Greece, trying to disguise their countries’ economic status. Draghi responded that the deals were “undertaken before my joining Goldman Sachs [and] I had nothing to do with them”, in the 2011 European Parliament nomination hearings.^[22][23]

Presidency

In December, 2011, Draghi oversaw a €489 billion ($640 b.), three-year loan program from the ECB to European banks. The program was around the same size as the US Troubled Asset Relief Program (2008) though still much smaller than the overall US response including the Federal Reserve‘s asset purchases and other actions of that time. Draghi’s ECB also promptly “repealed the two foolish rate hikes made by his predecessor …Trichet [and] … stepped up the bond purchases from struggling euro-zone nations” to help with the debt crisis, commentator Steve Goldstein wrote in mid-January, 2012. At that time, “Draghi and all of his colleagues (the decision was unanimous) chose not to cut the price for private-sector loans [below the 1% achieved with the "repeal"], even when he forecasts inflation to fall below the targeted 2% later this year.” As such, Goldstein concluded, Draghi would leave more moves to national leaders Sarkozy and German Chancellor Angela Merkel and central banks, contrasting Draghi’s actions with those of the Fed’s Ben Bernanke.^[24]

In February 2012, Nobel prize laureate in economics Joseph Stiglitz argued that, on the issue of the impending Greek debt restructuring, the ECB’s insistence that it has to be “voluntary” (as opposed to a default decreed by the Greek authorities) was a gift to the financial institutions that sold credit default insurance on that debt; a position that is unfair to the other parties, and constitutes a moral hazard.^[25]

Late in February, 2012, a second, somewhat larger round of ECB loans to European banks was initiated under Draghi, called long term refinancing operation (LTRO). One commentator, Matthew Lynn, saw the ECB’s injection of funds, along with Quantitative easing from the US Fed and the Asset Purchase Facility at the Bank of England, as feeding increases in oil prices in 2011 and 2012.^[26]

Awards and honors

Knight Grand Cross of the Order of Merit of the Italian Republic– awarded on 5 April 2000[27]

• 2009 honorary distinction in Statistics (University of Padua)^[28]
• 2010 honorary Master in Business administration (Vicenza, CUOA Foundation)^[29].

References

1. ^ Baker, Luke (24 June 2011). “EU leaders appoint Mario Draghi as new ECB president”. Uk.reuters.com. Retrieved 26 June 2011.
2. ^ “I compagni di classe del nuovo Governatore” (in Italian). corriere.it. Retrieved 5 September 2012.
3. ^ [dead link (2012-03-26) "Bank of Italy – Mario Draghi"]. Bancaditalia.it. Retrieved 26 June 2011.
4. ^ “Germany gives green light to Draghi”. LifeinItaly.com. 11 May 2011. Retrieved 25 June 2011.
5. ^ Francesco Cossiga told that during an interview at the morning television program “Uno Mattina”, Rai Uno [1]
6. ^ Meeting on Britannia, June 2, 1992, Corriere della Sera
7. ^ ^{a b} Foley, Stephen (Friday 18 November 2011). “What price the new democracy? Goldman Sachs conquers Europe” (in English). London: The Independent. Retrieved 18 November 2011.
8. ^ Kort, Katharina (29 September 2009). “Super-Mario für die EZB”. Handelsblatt
9. ^ “German paper says Draghi’s ECB chances diminishing”. Reuters. 19 January 2011.
10. ^ Kennedy, Simon; Neuger, James G. (19 January 2011). “Weber’s Withdrawal Throws Open ECB Race as European Debt Crisis Persists”. Bloomberg.
11. ^ “Draghi can lead the eurozone out of danger”. Financial Times. 13 February 2011.
12. ^ “The Italian’s Job”. The Economist. 17 February 2011.
13. ^ Blackstone, Brian (20 April 2011). “Italian Gains Support in Central Bank Race”. The Wall Street Journal.
14. ^ “So deutsch ist der neue EZB-Chef”. Bild. 29 April 2011.
15. ^ Fouquet, Helene (25 April 2011). “Draghi Said to Be Seen by Sarkozy as Trichet’s Successor”. Bloomberg.
16. ^ “Mario Draghi, bien parti pour prendre la présidence de la BCE”. Le Monde. 27 April 2011.
17. ^ “Draghi Appointed ECB Chief”, Wall Street Journal, 16 May 2011.
18. ^ “Mario Draghi appointed as head of European Central Bank”. BBC. 24 June 2011. Retrieved 24 June 2011.
19. ^ ^{a b} Galloni, Alessandra, and William Horobin (24 June 2011). “Draghi appointed ECB chief (intro-only without subscription)”. The Wall Street Journal.
20. ^ Watts, William L. (24 June 2011). “EU leaders confirm Draghi to head ECB”. MarketWatch.
21. ^ “EU appoints Draghi to ECB, Bini Smaghi to leave”. Reuters. 24 June 2011. Retrieved 24 June 2011.
22. ^ “Hearing of Mario Draghi nominated to take over the European Central Bank 14-06-2011″ (in (French)). Europa (web portal). Retrieved 26 June 2011.^{[dead link]}
23. ^ “EuroparlTV video: Interview: ‘Mario Draghi didn’t convince me’ – Pascal Canfin, MEP”. Europa (web portal). 15 June 2011. Retrieved 26 June 2011.
24. ^ Goldstein, Steve, “Unlike Bernanke, Draghi doesn’t aim to be hero”, MarketWatch opinion, January 12, 2012 11:06 am EST. Retrieved 2012-01-12.
25. ^ Stiglitz, Joseph (February 2012). “Capturing the ECB”. project-syndicate.org. Project Syndicate. Retrieved February 2012. “In fact, the ECB may be putting the interests of the few banks that have written credit-default swaps before those of Greece, Europe’s taxpayers, and creditors who acted prudently and bought insurance.”
26. ^ Lynn, Matthew, “What central banks provide, oil markets take away”, MarketWatch, February 29, 2012. Retrieved 2012-02-29.
27. ^ Draghi, Prof. Mario, “Cavaliere di Gran Croce …”, Presidenza della Repubblica webpage.
28. ^ Laurea honoris causa al prof. Mario Draghi
29. ^ I Master cuoa honoris causa

External links

Wikimedia Commons has media related to: Mario Draghi

• Profile (includes photo) at the European Corporate Governance Institute Website

Business positions
Preceded by Antonio Fazio	Governor of the Bank of Italy 2006–2011	Succeeded by Ignazio Visco
Preceded by Jean-Claude Trichet	President of the European Central Bank 2011–present	Incumbent

[show] v t e Executive Board of the European Central Bank

Categories:

• 1947 births
• Central bankers
• Goldman Sachs employees
• Group of Thirty
• Italian bankers
• Italian economists
• Living people
• Massachusetts Institute of Technology alumni
• People from Rome
• Presidents of the European Central Bank
• Sapienza University of Rome alumni

1. S&P 500 Climbs to Four-Year High as ECB Details Bond Plan …

   www.bloomberg.com/…/u-s-stock-futures-rise-on-ecb-bond-b…

   10 hours ago – The Standard & Poor’s 500 Index climbed above the highest closing level since 2008 as the European Central Bank announced specifics of its …

2. S&P 500 hits more than four-year high after ECB move – Yahoo …

   finance.yahoo.com/…/stock-index-futures-signal-firmer-0848…

   2 hours ago – Finance: The S&P 500 index leaped to its highest level in more than … to 13,274.48, on pace for its best daily percentage rise since June 29.

3. S&P 500 Rises to Four-Year High on ECB Bond Plan, US Jobs Data

   www.newsmax.com/StreetTalk/Stocks-market…/450974

   6 hours ago – The Standard & Poor’s 500 Index climbed above the highest closing level since 2008 as the European Central Bank announced specifics of its …

4. Wall Street cuts losses on Apple strength; FedEx down late | Reuters

   www.reuters.com/…/us-markets-stocks-idUSBRE8830862012…

   1 day ago – NEW YORK (Reuters) – The S&P 500 closed slightly lower on Tuesday as investors continued to await clarity on European Central Bank plans … Smoke rises after a Syrian Air Force fighter jet launched missiles at … Michael Clarke Duncan, nominated for an Academy Award in the 1999 drama “The Green …

5. Mario Draghi, Man with a mission impossible?@webworldismyoyster.com

   https://plus.google.com/…/posts/8CKwKnKFwAL

   Sid Harth – 31 minutes ago – Limited – Mario Draghi, Man with a mission impossible?@webworldismyoyster.com OF ECB, S&P 500 Dramatic Rise and I

6. S&P 500 rises to more than 4-year high on ECB move – Reuters

   www.moneycontrol.com › News › Wire News

   1 hour ago – S&P 500 rises to more than 4-year high on ECB move. MARKETS-USA-STOCKS:S&P 500 rises to more than 4-year high on ECB move …
   

7. World stocks up ahead of ECB meeting – Welcome to Charter.net

   www.charter.net/news/read.php?id…ps…

   12 hours ago – World stocks pushed up by hopes that European Central Bank will announce … higher at 13,122 and S&P 500 futures rising 0.6 percent to 1,412.20. … The CDC is reporting a dramatic spike in cases of West Nile virus over the …

8. World stocks up ahead of ECB meeting – MyVerizon.com

   entertainment.verizon.com/…/read.php?id…

   12 hours ago – World stocks pushed up by hopes that European Central Bank will announce … higher at 13,122 and S&P 500 futures rising 0.6 percent to 1,412.20. … The CDC is reporting a dramatic spike in cases of West Nile virus over the …

9. Asia stocks rise ahead of ECB meeting – Times Union

   www.timesunion.com/…/Asia-stocks-rise-ahead-of-ECB-meeti…

   18 hours ago – Asia stocks rise ahead of ECB meeting BANGKOK (AP) — Asian … ECB President Mario Draghi is expected to reveal on Thursday the … Australia’s S&P/ASX 200 rose 0.9 percent to 4.318.50. … The Standard & Poor’s 500 index fell 0.1 percent to 1,403.44. … IndyCar and NASCAR keep the drama rolling …
   

10. US Stocks: Stocks End Flat Ahead of ECB; Nokia Plunges – US …

    www.cnbc.com/id/48910121

    1 day ago – Watch the Democratic Convention Speeches · ECB May Come Out Swinging, … Gold Set for Dramatic Fall If Central Bankers Disappoint · Fears Rising, … The S&P 500 erased 1.50 points, or 0.11 percent, to finish at 1,403.44.

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• …and I am Sid Harth@webworldismyoyster.com