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Analysis
Ten pieces of advice for Mario Draghi

Ten pieces of advice for Mario Draghi

by David Marsh

Tue 1 Nov 2011

Mario Draghi, the urbane and experienced former governor of the Banca d’Italia, takes over today as president of the European Central Bank at a crucial time. The resolution of the Greek debt crisis has turned a corner after last week’s Brussels deal. This puts the spotlight firmly on Italy. Here are ten pieces of advice for the incoming boss.

  1. Take to heart Clausewitz’s (paraphrased) doctrine: “Monetary union is the continuation of war by other means.” Adopt a military-strategic approach to your job. Be stealthy. Don’t forget that Clausewitz learned a lot from Machiavelli.
  2. Leave politics to others – at least in your public statements. In your contacts with governments, inform; neither lecture nor cajole. During meetings with presidents and prime ministers when others are present, do not interrupt; speak only when you are spoken to. Don’t even try to be charismatic. You have profited from advance billing as a well-controlled central banking technocrat who is a canny operator, understands financial markets and has no love lost for Silvio Berlusconi – a feeling we understand is fully reciprocated. Playing, in an understated way, to these strengths, should get you through your first 100 days. After that, it may get much better – or much worse.
  3. Give no media interviews in your first months of office, pleading pressure of work. (Off-the-record journalistic conversations - so long as they are just that – may however be useful for you.) In your statements, press conferences and speeches, whether in words or in mannerisms, be as boring as possible. The Germans, your main constituents, expect central bankers to be like that. They will be pleased. In due course, they may even forgive you for not being Axel Weber. Many expected the former Bundesbank president to get the job. He turned it down partly because he sensed that his temperament and beliefs would be out of kilter with his duties. You can show you’re different.
  4. Don’t be swayed by commentators who, for a variety of reasons, are urging the ECB to buy vast quantities of Italian government bonds as a “lender of last report”. How on earth will you exert leverage over Mr Berlusconi if you agree a policy that frees him from the constraints of financial markets? Whatever happens, keep repeating that the whole ECB council decides policy on bond purchases, not simply the president. It’s up to the EFSF now to take the strain! Make the ECB’s decision-making processes on bond purchases sound as complicated as possible. If everything ends badly, you can plead collective responsibility.
  5. Learn who your friends are on the ECB council. You will need them. Make special efforts to get on well with the Bundesbank, at all levels. History shows that, if things get tough, you will need to know where you stand with the German central bank.
  6. Keep your statements at press conferences short and factual. If you don’t have an answer to any particular question, say so, without explanation. Do not give flowery answers that may be open to different interpretations. You are a technician, not a poet. Train yourself to speak slowly in short, precise and rather uninteresting sentences.
  7. Allow your deputy Vítor Constâncio, a former governor of the Bank of Portugal and also (in the 1970s) Portuguese finance minister, to answer questions at press conferences. Jean-Claude Trichet, your predecessor, very seldom did that. You can do things differently. Try to make sure that, on the big issues, Mr Constâncio agrees with you, but expresses his opinion in a slightly different way. This a) brings modest variation to these showpiece events, b) allows you to speak less, c) furthers the doctrine of collective responsibility.
  8. Don’t say things you may regret later. Mr Trichet displayed a leaning for political and economic statements that seemed to go beyond the realms of monetary policy. Life’s already full enough of complications without having to add to them.
  9. Don’t introduce Italian as the official language of the ECB, in spite of the fact that both you and Lorenzo Bini Smaghi hail from the same country. Don’t let staff see you and Lorenzo speaking too often together in the corridors in Italian. Don’t introduce Italian delicacies on to the ECB canteen menu.
  10. Work hard behind the scenes to find a solution to ease Mr Berlusconi out of office in the next six months. If his government were replaced by an interim technocratic leadership, that would be good news for Italy and for the euro. Doing nothing to prevent Italian bond yields from remaining above 6% might be helpful to that end. Don’t, of course, let anyone in the outside world know what you’re doing. Central bank governors are not supposed to dispossess their country’s prime ministers. It has happened before, though. The history of the Bundesbank and its relationships with post-war German governments shows that, for such actions, Frankfurt is not a bad place to be. Make the most of your new home.
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