“It is excellent to have a giants strength, but it is tyrannous to use it like a giant…”
Somewhere in Yoorp…
Interviewer: Mr Draghi… you’re a central banker. After promising to extend yet more emergency money to Greek banks, a Euro 7bln bridge loan to repay yourself next week, and a new Euro 86bln 3rd bailout, you must be delighted to have kept the Greeks in the Euro and enforced financial discipline upon them?
Mario: Well, actually.. that’s not my call. I am just the central banker. My only concern is the stability of prices within the Euro zone.
I: But what about the masses and masses of Greek and European bonds you and other European agencies now hold?
M: “Well exactly, that’s about stability of prices. If we hadn’t bought and financed these bonds, prices might have fallen, so it’s been something of a success.
I: Surely directly financing European sovereigns is against the rules of the Eurozone?
M: Probably not when it’s just a minor technical detail of our “stability of prices” policy.
I: I see. Going back to your Greek bonds, were these not at risk if Greece had defaulted?
M: Well, part of my stability of prices mandate requires they didn’t.
I: But you are giving the Greeks more money so they can pay you back what you’ve already lent them. Is that wise if they would default without your assistance?
M: Stability of prices… very effective you know…
I: I see… but how does retaining Greece in the Eurozone improve the outlook for jobs and growth?
M: Ah, well that’s very positive. Our balance sheet has grown and our staff levels have risen accordingly.
I: But what about in the wider economy?
M: Ah, you mean other jobs outside the Central Bank. Well, that’s something we’re hiring staff to quantify.
I: So you expect a positive number?
M: Oh yes. I’d say about 100 quantifiers if not more across Europe, on a per capita basis.
I: But are you expecting more jobs to be created in Greece – real jobs in industry and the service sector?
M: Well, yes, you’d think so, but it’s unlikely. We’re enforcing austerity to make sure Greece pays its debts so they’ll probably have to cut jobs, so that’s a good thing.
I: How so?
M: They’ll be able to pay us back… and that’s got to be a very positive thing while economic conditions remain so fragile.
I: But hasn’t the Euro, to quote yourself, made Europe “fragile, vulnerable and doesn’t deliver all the benefits that it could”?
M: Exactly… making it very important we deliver stability of prices so it doesn’t get worse.
I: Doesn’t it concern you the IMF is unlikely to participate in this bailout?
M: Well of course they won’t. The Greeks haven’t paid them the money they owe.
I: So who did decide to keep the Greeks in the Euro?
M: Ah, well, that’s a decision the Greeks have made themselves with the encouragement of Europe.
I: In what respect encouraged? Was it Brussels?
M: Encouraged in a traditional European way. Brussels was very keen to keep Greece in the Eurozone, because it’s good for jobs.
I: Whose jobs?
M: Their jobs, and by extension mine.
I: Did the Germans put pressure on them?
M: Yes and no. The German finance minister supports it, but thinks they would be better outside the Euro, so it wasn’t him. Mrs Merkel is quite keen on being a better European than some of her predecessors… but her electorate isn’t so enthused, so that’s potentially a future stability of prices worry.
I: Global economists and strategists, like Mo the Tash, have been quite scathing saying it’s likely Greece will remain in crisis and still exit the Euro. What do you think of that?
M: Well, that’s clearly going to be a time for further “stability of prices” policies.
I: Mr Central bank president, I thank you for your time.
Have a great weekend…
Strategist, Mint Partners