Draghi Reshapes ECB Crisis Pragmatism as Trichet’s Dogma Fades
Mario Draghi defied his own staff at his first meeting as European Central Bank president and voted to cut interest rates. As the crisis rages on nine months later, he is shaping the institution more and more in his own image.
Last week Draghi signaled he is willing to take the ECB further than his predecessor, Jean-Claude Trichet, in building a firewall around Spain and Italy. Earlier last month, he jettisoned Trichet’s mantra that senior bondholders at crippled banks shouldn’t suffer losses.
Together with three interest-rate cuts taking borrowing costs to a record low, more than 1 trillion euros ($1.2 trillion) in bank loans and a looser collateral framework, such shifts show pragmatism and a more flexible approach has taken hold at the ECB, said economists from UniCredit Bank AG to Berenberg Bank. Now Draghi is trying to win consensus across governments and central banks for a plan to shore up the region’s bond market that could be announced as soon as tomorrow after he chairs the ECB’s Governing Council meeting.