ECB conference: Mario Draghi discusses policy stance
Prime Minister Mario Draghi is raising pressure on pharmaceutical companies in a bid to speed up vaccine deliveries as Italy risks missing a key target in its campaign. The former head of the ECB is talking regularly to chief executive officers at vaccine makers in an attempt to obtain additional supplies and bring deliveries forward, according to officials who asked not to be named talking about the confidential discussions. Mr Draghi is acting within European Union efforts, the officials added.
However, the Prime Minister’s talks with pharmaceutical companies are part of similar efforts by other EU leaders and by the European Commission.
The official claimed Italy is respecting EU-wide contracts ensuring an equitable distribution, but Mrs Merkel and French President Emmanuel Macron might not see it in the same way.
France and Germany are also struggling with their inoculation programmes.
Moreover, Mrs Merkel in particular might still feel somewhat resentful towards Mr Draghi.
The two never enjoyed a good relationship while he was President of the ECB.
The German Chancellor even initially opposed his candidacy to lead the ECB because of Italy’s poor record on debt.
She wanted the former President of the Deutsche Bundesbank, Axel A. Weber, instead.
Italian book ‘L’Artefice’, by Jana Randow and Alessandro Speciale, recalled: “Merkel had obtained [former French President Nicolas] Sarkozy’s support in favour of the German candidate, and given that the two highest positions at the top of the institution generally had to be shared equally between a central and a peripheral nation of the Union, between a vast economy and a smaller one, the path to Weber’s presidency seemed to be smooth.
“Germany, the strongest economy in Europe, had not held a leading position in European politics since the days of Walter Hallstein, President of the European Commission from 1958 to 1967.
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“It had not proposed a candidate of its own when the EU chose the first President of the ECB, in 1998, and accepted the designation of a Frenchman as heir in exchange for the designation of Frankfurt, financial institution of the country, as the seat of the ECB.”
However, Mrs Merkel’s plan did not go as expected.
The outbreak of the Greek debt crisis in the Spring of 2010 cast a shadow over an already troubled eurozone as it attempted to regain ground lost in the Great Recession of previous years.
Eurozone leaders were not so sure whether they wanted a German to head to the ECB anymore.
Meanwhile, Mr Draghi was emerging as a great supporter of the euro.
Because her candidate, Mr Weber, decided to stand down, Mrs Merkel ultimately had to stand down.
The book added: “Angela Merkel came out in his favour in an interview with the press in mid-May, two weeks after a similar stance by French President Nicolas Sarkozy.
“Her support, however, was not unconditional.
“The Chancellor made it clear that Draghi expected a firm adherence to the rigorous monetary tradition so dear to a country still traumatised by the hyperinflation of the Twenties.”
In the following years, the bad blood between Mr Draghi and Mrs Merkel continued.
Neil Irwin, the senior economics correspondent for The New York Times, even described the relationship between Mr Draghi and Germany as “dysfunctional”.
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Italian Prime Minister Mario Draghi
The European Central Bank (ECB)
He wrote in 2014: “We’ve known for some time about the tension between the ECB, charged with guiding the economies of the 18 countries that use the euro, and Germany, the largest and richest member of that zone.
“It’s not an overstatement to say that the future of Europe depends on how this conflict is resolved.
“Mario Draghi is barely on speaking terms with Jens Weidmann, the President of the German Bundesbank (and a member of the ECB’s policy-setting governing council).
“When Mr Draghi dispatched a deputy to Berlin to visit aides to Chancellor Angela Merkel, the message received was that vocal German attacks on the central bank were unlikely to end anytime soon.”
The central issue at the time was that Mr Draghi and the ECB saw Europe as being on the cusp of a triple-dip recession.
Europe was also at risk of getting stuck in a cycle of very low inflation and stagnant growth.
For this reason, the Bank was considering doing an American-style programme of quantitative easing, or buying vast sums of bonds with newly created euros, to try to avert this fate.
It was also encouraging Germany and other European nations to loosen the purse strings a bit and pursue fiscal policy that was more supportive of growth.
On the other hand, in Germany, both elected leaders in Berlin and central bankers at the Bundesbank in Frankfurt viewed the worry over deflation as overwrought, the need for fiscal probity as critical, and any effort to print money to buy government bonds as the pathway to hyperinflationary perdition.
Mr Draghi ended up doing “whatever it takes” to save the euro and tensions reached an all-time low in 2016.
The now-Italian Prime Minister told German politicians to stop meddling after they publicly criticised ECB actions.
Mr Draghi said: “We have a mandate to pursue price stability for the whole of the eurozone not only for Germany.
“We obey the law, not the politicians, because we are independent as stated by the law.”
The outburst came after German Finance Minister Wolfgang Schaeuble blamed the ECB for the declining popularity of Mrs Merkel’s ruling party.
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German Chancellor Angela Merkel
He said the bank was causing “extraordinary” problems for Berlin and was in part to blame for the rise of the anti-immigration Alternative for Germany (AfD).
The ECB had slashed interest rates further, a move which was hammering German savers, but the Bank was faced with the more pressing problem of a struggling eurozone.
Mr Draghi had also unleashed a fresh round of quantitative easing, injecting billions of pounds worth of cash into the economy in a bid to kick-start growth.
Former German Economy Minister Sigmar Gabriel also blasted the move, stating the policy had reached its limits.
Mrs Merkel defended the comments made by her government and said they were right to criticise the Bank.
The German leader made it plain that she also felt the ECB’s policy was wrong but insisted that this did not compromise the independence of the Bank.
She said: “The ECB is independent in its policy.
“It has a clear mandate, that of price stability.
“It’s uncontested that monetary policy can’t solve all problems. That’s why it’s the responsibility of us politicians to do our homework in our area, in economic policy, in structural reform.
“The better we do this, the faster growth will come and then the inflation rate will certainly rise again.”
She added: “That people in Germany nonetheless discuss that interest rates were once higher, that is legitimate, I believe.
“And it shouldn’t be confused with interference in the independent policy of the ECB, which I fully support.”
Mr Draghi emphasised the controversial measures were working and vowed to use the full scope of his monetary powers for “as long as needed”.
In another swipe, he also laid some of the blame for the eurozone’s struggling economy at the feet of governments.
He said the region’s economy would have been on a more solid footing if fiscal policy and more ambitious reforms were pushed through.
The chief insisted the economy would have been in a worse state today had the bank not cut rates and printed more money, but said more time was needed to prove his point.
He said: “Our policies work, they are effective. Just give them time to fully display their effects.
“Global uncertainties persist. Looking forward, it is essential to preserve an appropriate degree of monetary accommodation as long as needed.”