The troubled legacy of Mario Draghi, saviour of the euro
Mario Draghi may have rescued the euro in its darkest hour, but failed in his only official mission of keeping inflation within its target range.
It is no exaggeration to say that Mario Draghi rescued the euro "in its darkest hour", writes Simon French in The Times. The outgoing president of the European Central Bank (ECB) handed over the reins to former International Monetary Fund chief Christine Lagarde this week after a tumultuous eight years in the job.
"Whatever it takes"
The great paradox is that "Super-Mario" saved the euro yet failed in his only official mission, says Pierre Brianon on MarketWatch. The ECB is meant to keep annual inflation "below but close to 2%". The bank has missed that target every year since 2013, with eurozone inflation coming in at just 0.8% in September. And for all the plaudits, Draghi leaves the ECB on a "sour note", says Tom Fairless in The Wall Street Journal. A decision in September to cut a key interest rate to -0.5% and restart quantitative easing has opened up deep divisions.
Officials from northern countries question the effectiveness of more easing and point out that at this rate the bank will run out of eurozone bonds to buy by the end of 2020. The ECB will then either have to break its own "self-appointed limit of buying no more than a third of outstanding bonds" or turn to buying assets such as "bank bonds and equities". Negative rates are also unpopular: German tabloid Bild once labelled Draghi as "Count Draghila", the vampire sucking the German saver dry.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't fight Frankfurt
The "stunning phenomenon of negative rates" has yet to boost eurozone stocks, says John Authers on Bloomberg. The region's markets have underperformed "spectacularly" during Draghi's tenure. That leaves them looking cheap on a relative basis. "Perhaps the best that can be said of the Draghi legacy for equity investors is that he might have created an almighty long-term buying opportunity."
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and Emerging Markets, where his experience living in Beijing and conversational Chinese prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Shein’s London IPO could go ahead, despite forced labour concerns
The chief executive of the Financial Conduct Authority suggests that alleged human rights breaches aren’t a reason to block Shein’s proposed London IPO
By Dan McEvoy Published
-
Elon Musk's $56bn Tesla pay deal rebuffed again by US judge
It is the second time Musk's pay deal has been rejected, with judge Kathaleen McCormick upholding her previous January decision
By Chris Newlands Published