Posts Tagged ‘sarkozy’

Meet Mr. Draghi

May 3, 2011 Leave a comment

Likely to be the next head of the ECB when Trichet leaves later this year, Mario Draghi is currently head of Italy’s central bank. He’s got the right resume:

 PHD in economics from MIT

  • 1984-1990: Executive Director of the World Bank
  • 1991-2001: Director General of the Italian Treasury
  • 2002-2005: Like seemingly every central bank official, he worked at Goldman as vice chairman and managing director of GS International
  • 2006-present: Governor of Bank of Italy

On first glance, Draghi seems an excellent candidate with the experience needed to navigate the multifaceted, multi-interest ECB. But there’s a different way to look at this resume. One, he has the pedigree of all the same folks who had all the same successes and failures in the past. That is, he’s a status quo guy with the same worldview—more or less—as everyone else. Meaningful change, this is not. Two, this resume is like an archetypal, picture perfect show of what it takes to be successful in the political side of economics. Make no mistake, and as has been said on this site often, central banking is a political position both in the US and abroad now. Folks like Sarkozy, Merkel, and other EU leaders know Draghi is going to play ball with them. That’s central banking today.

Reform is Tough

September 9, 2010 Leave a comment

As pointed out on 6/30, austerity is hard to do. Folks just don’t like losing benefits (we feel losses more than we feel gains). So, even in the age of ailing/shrinking unions, workers will mount big, passionate opposition to that which the government might taketh away. (Recent polls suggest 70% of the French actually support pension reforms, but those against it are simply shouting louder.) As economic results continue coming in better than previously believed, even public officials themselves are losing their will.

Earlier this week. protests in France against Sarkozy’s pension reform plans grew to between 1-3mn people. President Sarkozy wanted to raise the retirement age in earnest, but had to give back a little ground. Though he did keep intact the two most controversial areas of reform:  raising the retirement age from 60 to 62, and lifting the age at which a person can get a full pension irrespective of social security contributions from 65 to 67.

These small changes are unlikely to fully appease protestors—they’re expected to turn out again on Sept 18th & 19th. Since Sarkozy has no IMF or EU to answer to (like Greece does), I expect he’ll give more ground. He’s getting more unpopular by the day, and he certainly can’t be blind to the anti-incumbent sentiment sweeping the globe right now (his poor partner in crime, Fraulein Merkel!).

In sum, big new fiscal spending globally is mostly being scaled back, but it’s nowhere near strangled. As the global economy continues to move through its recovery phase, that’s a fine enough thing, particularly with bond yields remaining very low.


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