There have been four changes of government in Italy since 1991 but Mario Draghi has rarely seemed threatened as director general of the republic’s treasury. While treasury minister Carlo Ciampi – who also appears certain to keep his post in the new administration of prime minister Massimo d’Alema – has concentrated on reducing Italy’s budget deficit in readiness for the European single currency, Draghi has emerged as the most powerful figure behind wide-ranging financial reforms. He and Ciampi were also central to the planning and implementation of the “euro tax” and a major deficit reduction, which enabled Italy to meet the criteria for entry to the first round of Emu.
As far as foreign investors are concerned, Draghi’s influence has been most obviously felt in the field of privatization. Over the past seven years, he has had overall responsibility for Italy’s programme of sell-offs – one of the largest in the world according to the OECD. As head of the treasury department entrusted with the shares of the state companies to be sold he has ultimate responsibility for choreographing the transactions. Notable achievements of his team (known in the treasury as “the Draghi boys”) include the sale of Telecom Italia – a highly complex transaction that greatly increased Italy’s number of shareholders – and oil company Eni.
Besides privatization, Draghi has concerned himself with the development of Italy’s equity and debt markets, pension reform and the creation of transparent corporate governance rules – all of which have earned him plaudits from international financiers. “He’s obviously extremely intelligent and focused,” says an English banker who has worked with him frequently over the past seven years, “but he is also extremely friendly, quietly spoken, graceful, a very good listener – extremely good company in fact.”
Draghi’s unassuming charm has been a vital asset when dealing with ministers and easing through changes to Italy’s corporate governance and transparency laws, reforms that have inevitably ruffled a few feathers among the country’s old-guard. Following the finalizing of a new set of corporate governance rules last year – some of them mandatory, some not – Draghi came in for a vitriolic assault in an editorial in the daily newspaper La Repubblica. He was described as “one who does not have the air of a high-ranking official in the public administration, but rather that of a young yuppie.” He has also been accused of being “too Anglo Saxon”, a criticism that does not worry him “if being Anglo Saxon means emphasizing the importance of markets, and the transparency and quality of information”.
The son of a banker, Draghi was born in 1947 in Rome. He graduated in economics from Rome University in 1970 and later received a PhD in economics from MIT. In 1981 he became professor of economics at the University of Florence, a chair he held for the next 10 years. In 1983 he worked for a year as an economic adviser at the treasury ministry before moving to Washington to become one of 21 executive directors of the World Bank. Over the next six years, he was involved among other things in helping to sort out the Latin American debt crisis and in the creation of the Multilateral Investment Guarantee Agency.
Draghi returned to Italy in 1990 to work as a consultant, advising the Bank of Italy among others, before being appointed director general of the treasury in 1991. Seven years on, Italy is a very different country. The budget deficit has fallen from 12% to 2.5% of GDP and Italy’s enhanced credibility abroad is reflected by a narrowing of the spread on its benchmark 10-year government bond from 625 basis points in 1995 to 40bp today.
Draghi’s priorities, he says, are “to make sure that in the near future many more instruments for investors become active on our financial markets and that pension funds take off. I’d also like to see corporates and individuals gaining much wider access to the capital market. Finally I’d like to see in place a more developed form of corporate governance.”
Draghi is also keen to speed up the process of private-pension reform – something of a political hot potato. Italy’s high unemployment rate of around 12% owes much to the high level of social-security contributions that employers have to pay. Draghi is in favour of raising the retirement age – currently around 55 – thereby saving money from pension outgoings that could be used to finance a lowering of the levy on employers.
Away from the treasury, Draghi, who is married with two children, enjoys reading Henry James novels, rock-climbing in the Dolomites and visiting archaeological sites in Egypt, Lebanon and Syria. Philip Eade
