Market: Football, owl and whatever it takes… These striking sentences from the president of the ECB

(BFM Bourse) – During its 25 years of existence, presidents and presidents of the European Central Bank have made funny and/or thunderous statements. The BFM Bourse compiles a short non-exhaustive list.

At 25 we have had time to say a lot of things and deliver a number of sensational statements. The European Central Bank (ECB) has just celebrated its 25th birthday with a celebration organized last Wednesday, although the European institution was officially born on June 1, 1998, some time before the introduction of the euro.

Several leaders have succeeded at the helm of this institution, which has been through a series of crises, with the bankruptcy of Lehman Brothers, the sovereign debt crisis in the Eurozone, the pandemic and, more recently, the rise in inflation. During those 25 years, these presidents made some statements, sometimes of great importance, sometimes very funny. Here are four examples.

>> Access our exclusive graphical analysis and familiarize yourself with the trading portfolio

Mario Draghi’s famous “whatever it takes”

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro”. “As part of its mandate, the ECB is ready to do whatever is necessary to preserve the euro,” Mario Draghi declared at the end of July 2012. The then-president of the Italian Council added “and believe me, it will be enough”.

This phrase has entered the posterity of monetary policy and is very similar to the “whatever the cost” that will be uttered years later by Emmanuel Macron. These are perhaps the most striking words ever uttered by a member of the European institution.

Because it happens in a harmful context. In the summer of 2012, the eurozone was weakened by the sovereign debt crisis due to fears of contagion from Greece’s difficulties. “At the time, Southern European countries such as Greece, Italy, Spain and Portugal faced significant refinancing problems caused by the interdependence of high and persistent budget deficits, the expansion of public debt before the financial crisis and the disappearance of exchange rate mechanisms due to monetary union”, emphasizes the asset manager Ethenea.

So much so that the bond yields on these countries’ 10-year debt in the markets rose sharply while inflation was low. Swiss Life Asset Managers gives the example of Italy, which faced an interest rate of 6.5% in July. For Spain, this return was close to 7%.

The euro’s survival was at stake and Draghi’s strong words helped ease market fears as bond yields fell. These words will be followed by facts, since in September 2012 the ECB will announce the possibility of using the OMT program (outright monetary transactions), unlimited purchases of government bonds on the secondary market, a kind of monetary “bazooka”. Never used, this program will nevertheless be controversial, with appeals to European justice ultimately validating the program’s legality.

There is still this ability of Mario Draghi to calm the market with three words (“whatever it takes”). To the point of single-handedly saving the euro? In any case, the banker will this year be appointed as “personality of the year” by Financial Times.

Christine Lagarde, “an owl” full of wisdom

“I am neither a dove nor a hawk, and my ambition is to be this owl that is often associated with a little bit of wisdom”. “I am neither a dove nor a hawk, and my ambition is to be the owl often associated with a bit of wisdom”.

It’s December 2019 and Christine Lagarde assumed her duties as president of the European Central Bank the previous month. Market watchers are wondering how to rate the former managing director of the IMF. Is she a “hawk” or a “dove”?

By refusing to choose one or the other, the central banker thus argues for a third way of reason, answering questions from journalists during the ECB’s press conference. A way to probably also make promises to each camp on the central bank’s board. Because as pointed out then New York TimesMario Draghi’s year of accommodative monetary policy ended up splitting the ECB’s Governing Council.

Remember that in the jargon of monetary policy, a “hawk” is a nickname given to central bankers who are more concerned with price stability and inflation control than employment and growth, as opposed to the “dove”. The owl, in turn, accompanies the goddess Athena in Greek mythology, a figure of wisdom.

When Trichet evokes football to show the strength of the European economy

“I have said from time to time that you should not underestimate Europe. Especially in football. (…) In the top four, there are three European teams – by the way, all from the euro area!”. Europe should not be underestimated. In football, especially (…) in the top four, you have three European teams, all from the Eurozone by the way!”

Jean-Claude Trichet, president of the European Central Bank from 2003 to 2011, then entertained a question from a journalist. We are in July 2010, the football World Cup in South Africa is in full swing. And although France were miserably eliminated in the first round, Germany reached the semi-finals, while Spain and the Netherlands met a few days later in the final. A journalist then asks Jean-Claude Trichet to “relax in the atmosphere” if he has a favorite (answer from the subject in one word: no) and if this topic was mentioned during the board.

But as pointed out Le Figaro at that time, Jean-Claude Trichet also used the beginning of his answer about football to send a confident message about the European situation. He will give other indications and in particular emphasize that growth in the second quarter in the eurozone looks set to be better than in the first. With these upbeat words, the euro is appreciating slightly against the dollar.

Lagarde’s Thatcher reference

“The lady is not tapered”. This sentence uttered in September 2021 by Christine Lagarde is difficult to translate. It actually refers to a famous statement by Margaret Thatcher, the “Iron Lady”, the British Prime Minister between 1979 and 1990. In October 1980, the leader uttered a phrase called “the lady is not for turning”, the lady refuses to back down”) which refers to Margaret Thatcher’s refusal to reverse her policy of liberalizing the economy.

As Societe Generale summed it up at the time, Christine Lagarde pointed out that the European Central Bank was not in the process of “tapering,” that is, a gradual reduction of its asset purchase program. The banker then called for a “recalibration” of the ECB’s Pandemic Emergency Program (PEPP).

By Julien Marion and Paul Louis

Julien Marion – ©2023 BFM Bourse

Leave a Comment