Mario Draghi's reign in Frankfurt is all but over. Super Mario, his preferred moniker with debt-laden PIIGS – Portugal, Ireland, Italy, Greece and Spain – which he saved from near extinction in the bond markets in 2012 with his "whatever it takes" pledge, will step down as European Central Bank (ECB) president in October.
The dapper Italian backed up his promise to defend the euro by any means with a massive multitrillion euro bond-buying programme and a policy of keeping interest rates at a record low of zero per cent, a suite of measures that is widely credited with ending the euro zone debt crisis.
His easy-money agenda has, however, come in for criticism with euro zone growth still on the floor and inflation consistently below the ECB’s 2 per cent target rate. Keeping rates low or at negative levels for so long undermines the profitability of banks which, in turn, curtails them from lending into the economy. Might this explain the current phase of sluggish growth?
Draghi has stuck to his guns and this week hinted at another dovish flight into rate-cutting and asset purchasing at the ECB’s next meeting in September.
He said on Thursday that officials would look into a range of stimulus options – including rate cuts, a commitment to keep policy exceptionally loose for years to come and another quantitative easing package – to counter fears that the bank would persistently undershoot its 2 per cent inflation target.
So he means to go out the way he came in. National Treasury Management Agency (NTMA) boss Conor O'Kelly joked recently that he should have a photo of Draghi on his desk, so helpful has he been to the agency and its management of Ireland's monster debt.
Keeping rates at these anaemic levels has reduced the interest repayments on our €215 billion in borrowings and allowed the NTMA refinance several so-called debt “chimneys” with the minimum of fuss.
