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When Mario Draghi became president of the European Central Bank (ECB) eight years ago, it was bad for monetary union. "The eurozone in state delirium, the politics as paralyzed, (...) the citizens unsettled - and in the midst Mario Draghi. (...) It is an almost impossible task, which he has taken."
A man on a mission impossible, faced with sheer insurmountable political and economic adversities - that's what a column I wrote when he took office. The ECB stood "with its back to the wall". It must "prevent a system failure, must save States and banks from tipping, simply and simply, because in the institutionally underdeveloped euro-land no one else has the power and the means to do so" - even if such crisis intervention actually did not belong to the tasks of the central bank and the ECB had no mandate for it. It would not be surprising if Draghi failed.
On Thursday , he will chair his last Governing Council meeting. On 1 November succeeds Christine Lagarde. At the end of a long, turbulent tenure, the question arises: Mario Draghi failed?
The obvious answer is no. When central banks fail with a crash, whole societies shake, including riots and uprisings. There can be no question of that. But there are also misdemeanors that are less obvious, yet carry the seeds of future problems.
Courage, conflict and error
When Draghi took over the leadership of the ECB in autumn 2011, the euro crisis was nearing its peak. In ever new waves, the financial markets speculated on the departure of individual heavily indebted economies from the eurozone. Inflation was also considered a serious risk; the oil prices were high.
Various scenarios with extreme consequences were circulating at that time: a break-up of monetary union, linked to another, even larger global financial crash than that of 2008; the slide into a permanent recession and deflation; declining inflation. None of this has occurred. And that's also what Draghi deserves.
Courageous, ready for conflict and unerring, the Italian ECB chief has prevailed. He pushed aside traditional monetary policy ideas, something that many, especially in Germany, have not forgiven until today.
The man who surprised everyone
Right at the beginning of his tenure, the ECB flooded banks in the euro area with an unprecedented liquidity program (called LTRO) that helped prevent an acute banking crisis and put some stress on financial markets. In the summer of 2012, Draghi even surprised his own people by announcing that the ECB would do anything to keep the euro area together - " and believe me, it wants to be enough ". Thus he quasi single-handedly stopped the speculation against individual euro states. Even better: To date, the ECB did not have to spend a cent on it. The threat was enough to keep the store together.
Under Draghi, the central bank cut interest rates to zero and introduced a charge on deposits held by banks with the central bank rather than lending money to businesses and citizens. In 2015, the ECB launched a large-scale program to buy up securities. From the perspective of orthodox central bankers, the Draghi ECB has thus exceeded several red lines.
But the results seem to prove the course. Since the start of asset purchases, lending in the euro area has started again. Companies can finance investments. Employment has increased significantly. In parts of the euro area, the effects of the deep crisis are still felt, especially in Italy and Greece. But none of the grim scenarios from the time of Draghi's inauguration has materialized. That alone is a remarkable achievement.
Without Draghi at the head of the ECB, things would probably have been different in Europe in recent years. And not necessarily better.
It is not an absurd assumption that without the hyperactive ECB, the monetary union would either have exploded - or could only have been saved by extensive transfer payments. In both cases, Angela Merkel's chancellorship would probably have ended long ago and Germany's political landscape would be more fragmented, as has long been the case in other countries. That Merkel still ruled in a reasonably stable coalition, owes her not least to the ECB chief.
So great, Super Mario? Not quite. The legacy of Draghi's term includes two areas of concern - economic and political - that will weigh on the eurozone's wider vision.
Economic risks
Like other central banks, the ECB navigates in unmapped waters. Why did long-term interest rates continue to fall over many years? What does it mean that many bonds today are subject to negative interest rates? Why is employment at record levels while inflation rates are low? Why do statisticians see stagnating productivity gains, even though we live in a time of technological breakthroughs? How are digitization, demography, trade wars and climate change changing economic structures? What does all this mean for central banks' core tasks of keeping prices and financial markets stable?
We are dealing with structural breaks whose causes and implications are still vividly debated by economists. The central banks must act, albeit under great uncertainty.
The Draghi ECB was on the safe side, as it swam in the mainstream of the western central banks. Like the US Federal Reserve, such as the central banks of Britain, Japan, Sweden or Switzerland, the ECB has expanded its toolbox with exotic gadgets such as "negative deposit rates" and "quantitative easing" without knowing its true impact.
These measures are not without risks and side effects. Negative deposit rates, which banks have to pay on deposits with the ECB, tend to destabilize the banking sector, as the ECB itself has repeatedly stated in its reports on financial stability.
Trillions of purchases of securities in turn have led parts of the corporate sector in the eurozone to become increasingly indebted. This applies in particular to France. The total liabilities of French companies are now among the highest in Europe. Debt elsewhere in the eurozone is also extremely high, on average much higher than in the US, for example. High liabilities are not a problem as long as the profits bubble. In the approaching recession, however, they are likely to become a crisis amplifier. It is possible that, in hindsight, the ECB's course turns out to be too expansionary.
Political risks
Draghi's tenure leaves obvious cracks. His latest decision to restart the bond-buying program and further cut its negative deposit rates met with considerable resistance at the September Council meeting. The central bankers of France, Germany, the Netherlands and other euro states opposed it. Some former ECB leadership figures, including the Germans Otmar Issing and Jürgen Stark, attest to Draghi and Co. in a joint paper that the ECB is on a dangerous course. Board member Sabine Lautenschläger submitted her resignation - the third German ECB leader (after Stark and the former Bundesbank boss Axel Weber), which prematurely resigned her office.
The public is also skeptical. In the latest Eurobarometer survey, 43 percent of Eurozone citizens said they distrusted the ECB; as many said they trusted the central bank. Ironically, especially in the euro-zone states Germany and the Netherlands, where criticism of the impact of low interest rates on savers has not stopped, there have been clear majorities per ECB. In France, Italy or Spain, on the other hand, distrust of the central bank is distrusting.
Of course, Draghi is not alone to blame for the ECB's weak reputation. The turnaround in public opinion came with the financial crisis of 2008/09, ie years before taking office. Nevertheless, continued distrust of the central institution of the euro area is a problem for the future.
Draghi, and that is probably the biggest charge you have to make him, is not a great communicator. As brilliant as an economist, as skilfully as he appears: Draghi has neither managed to weld the Governing Council together into one entity - which his predecessor Jean-Claude Trichet did much better with much patience and skill - he still could, the to convince more public of his course.
Great tasks for his successor Christine Lagarde - but no mission impossible .
The main economic events of the upcoming week
Monday
Ottawa - Trudeau under pressure - parliamentary elections in Canada: Prime Minister Justin Trudeau, political star of recent years, has to fear for his re-election.
Report Season I - Business Figures from SAP and Haliburton.
Tuesday
Karlsruhe - Infinite History - The Federal Court of Justice reviewed the acquittals for the ex-German bank chiefs Breuer, Ackermann and Fitschen from 2016. It is still about the church bankruptcy and alleged collusion among the three defendants.
Ingolstadt - Germany, dirty - Judgment in the corruption process against the former Lord Mayor of Ingolstadt, Alfred Lehmann (CSU).
Report Season II - Financials of UBS, Novartis, Kuehne & Nagel, Randstad, McDonald's, Procter & Gamble, UPS, Biogen, Reckitt Benckiser.
Wednesday
Report Season III - Revenues from Hannover Re, KWS Seed, PSA, ABB, SEB, Boeing, Ford, Caterpillar, AT & T, Eli Lilly.
Thursday
Frankfurt - Draghi's last lift - ECB Governing Council: For the last time in his eight-year term, Mario Draghi will chair the meeting of the most important body of the euro bank.
Wolfsburg - The core of the brand - VW introduces its new mass model, the Golf 8.
Munich - What is a cartel worth? - Trial against the truck cartel from Daimler, DAF, Iveco, MAN and Volvo / Renault, which had punished the EU Commission in 2016 with a billion penalty. Now customers are demanding damages.
Report Season IV - Financial Figures of Daimler, BASF, Saint-Gobain, Nokia, RBS, Intel.
Friday
Munich / Nuremberg - German upset - Publication of the ifo business climate index on the situation and expectations of companies and the consumer climate study conducted by GfK.
Berlin - Benefits of the boom - Third round of negotiations for higher minimum wages in the construction industry.
Report Season V - Financials of Gea, MTU, Glencore, Barclays.
Sunday
Erfurt - On this side and beyond the political center - state election in Thuringia.