Brussels, 14/06/2011 (Agence Europe) - It was without mishap that Mario Draghi, who is likely to succeed Jean-Claude Trichet at the head of the European Central Bank in November, was checked over by the European Parliament's economic and monetary affairs committee on Tuesday 14 June. The committee is expected to take a favourable stance on Draghi's candidacy on Wednesday. A number of MEPs were nonetheless critical of the fact that the current governor of the Banca d'Italia had held a post at the US investment bank, Goldman Sachs.
None of the recent events - the debt crisis or the dependency of certain European banks on ECB bailout liquidity - bring into question the fact that the economic and monetary union (EMU) is a success, Draghi said. Thanks to the EMU, the euro is a “strong and credible” currency, financial integration has been greatly stimulated, and medium-term price stability at a level close to but below 2% has been preserved. The central banker pledged to continue that course by gradually returning to the “accommodating” monetary policy of the Frankfurt bank, and by eliminating the exceptional measures taken after the financial storm, when the time is right.
Greece. In answer to questions raised by a number of MEPs on a possible solution to the Greek debt crisis and in the eurozone, Draghi said the European Union should not be a “union of budgetary transfers”, thus answering German fears that the rich countries are keeping the countries in difficulty afloat. “There is no quick fix”, he said, underlining that first of all economic adjustment programmes must be fully implemented and financial aid granted must be subject to a high level of conditionality. Reiterating the ECB's stance in favour of voluntary involvement by Greek debt holders, albeit in opposition to default by Greece (see EUROPE 10395), Draghi said the cost of default on the part of a sovereign state exceeds the returns. There would be several problems: - external funding would still be required to finance the defaulting country's primary deficit and/or inject fresh capital into banks whose sovereign bonds are affected by creditor haircuts; - the root causes of the debt crisis, such as the weakness of economic competitiveness, would not be dealt with; - and there would be the risk of a chain reaction with possible contagion on the very broad market of CDS insurance contracts against the risk of default by sovereign countries.
Mario Draghi said he was in no way involved in any counselling to Greece by Goldman Sachs before he arrived at the bank in the 2000s. Counselling was aimed at helping the country disguise its indebtedness through accounting dodges. He said he had no relations with the public authorities and hence had no knowledge of any of that. He went on to underline that his current position was a guarantee of his steadfastness with regard to the private sector. (M.B./transl.jl)