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Mario Draghi takes centre stage at ECB

ECB head Mario Draghi
Image caption Mr Draghi has the necessary experience and political acumen to take charge of the ECB in these challenging times, analysts say

Mario Draghi takes the helm of the European Central Bank (ECB) at the most difficult period in its 13-year history.

With the eurozone debt crisis still far from over and the threat of contagion still hanging over Italy in particular, many observers believe the future of the euro remains at stake.

Much will depend on the 64-year old Italian central banker.

"Super Mario", as he is known, is well respected and widely recognised as the best person to head the ECB.

He certainly has impeccable credentials. A graduate of the University of Rome, he holds a PhD in economics from the Massachusetts Institute of Technology and served as professor of economics at the University of Florence between 1981 to 1991.

But Mr Draghi is no dry academic. He went on to become managing director and vice-chairman of Goldman Sachs International, giving him a vital insight into how financial markets work in practice.

He has also worked as an executive director of the World Bank, director general of the Italian Treasury and, perhaps most importantly in the eyes of investors, head of the Financial Stability Board.

Finally, he was appointed governor of the Bank of Italy in December 2005.

'Hard line'

Image caption Mr Draghi has earned the nickname 'Super Mario' for his efforts at the Bank of Italy

Mr Draghi will need all his experience and knowledge to steer the eurozone out of its current crisis.

He is unlikely to instigate any significant policy changes, analysts say.

Like his predecessor Jean-Claude Trichet, "he is relatively hawkish in terms of inflation," says Jonathan Loynes, chief European economist at Capital Economics.

But the ECB is no longer concerned solely with managing inflation, but also with crisis management.

Here again, Mr Draghi is unlikely to stray too far from the bank's established policy.

"The ECB has taken a relatively hard line on opposing debt restructuring and advocating austerity measures. There is no indication that Mr Draghi will take a different line," says Mr Loynes.

That may be so, but in one particular Mr Draghi has already indicated he may be more willing for the bank to take on a wider role in the eurozone's efforts to tackle the crisis.

Nowhere is this better demonstrated than in Mr Draghi's apparent softening of the bank's somewhat reluctant stance on buying up sovereign debt to help bring down the borrowing costs of highly indebted governments such as Italy.

Mr Trichet begrudgingly accepted eurozone leaders' calls for help; Mr Draghi, it appears, may be rather more accommodating.

"There had been speculation the ECB would stop buying government bonds once the [eurozone bailout fund] European Financial Stability Fund (EFSF) was given powers to do so," says Mr Loynes.

"But [Mr] Draghi has suggested it will carry on. This is a possible indication of a greater willingness to provide unconventional support [to the eurozone economy]."

Political acumen

What is certain is that many challenges remain.

Not least, the three main policy tools agreed by eurozone leaders to tackle the crisis - banks accepting a 50% loss on Greek debt, boosting the fund and recapitalising big banks - have yet to be implemented.

And here lies the great challenge for Mr Draghi, for the ECB's position remains rather more hardline than that of Germany.

Image caption German Chancellor Angela Merkel backed Mr Draghi candidacy for the ECB's top job

"The two most powerful institutions in the eurozone are the Berlin government and the ECB," says Jan Randolph, head of sovereign risk at IHS Global Insight.

"If these two don't get on, there can be no solution [to the debt crisis]."

Circumstances have forced the two closer together in recent months, but divisions remain, particular over the bank's reluctance to get more closely involved with the EFSF.

Here again, Mr Draghi seems ideally suited for the job. For a start, his candidacy to head up the ECB was supported by German Chancellor Angela Merkel.

The fact Mr Draghi is Italian is also beneficial, as it helps to "bridge the North-South divide" within the eurozone, according to Mr Randolph.

'Credibility'

Perhaps most importantly, he also possesses the necessary political acumen to balance the competing interests of the 17 governments that make up the eurozone, Mr Randolph says.

These particular skills could be crucial when it comes to implementing measures needed to end the crisis and restore confidence in the eurozone economy.

"The challenge is to convey to markets and policymakers the compromises agreed at ECB board level," says Mr Randolph.

"Trichet could do it and Draghi can do it. He has the market credibility."

With so much riding on the outcome of the euro debt crisis, it would certainly appear at least that the ECB has got the right man for the job.

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