Mario Draghi is having a good war

by Hugo Dixon

Reuters
July 20, 2015

Central bankers sometimes distinguish between peacetime, when economies are running relatively normally, and war, when there is a financial crisis. Mario Draghi is having a good war.

The European Central Bank president has done almost everything he can to keep Greece in the euro without breaking his organisation’s rules. Although Draghi has been attacked by Athens for asphyxiating the country and by hardliners for being lax, he has got the balance about right.

Greece’s radical left government has complained that the ECB cut off funding to the country’s banks in order to bring it to heel and accept more austerity. Some wilder voices have even argued that the ECB deliberately provoked a depositor run so that it would have an excuse to close the banks.

In fact, Draghi has been holding off hardliners on the ECB’s Governing Council who wanted to cut off liquidity to the banks completely. As he said on July 16: “There were some who were actually calling for a cut to zero, which would have caused an immediate collapse of the banking system.”

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