Mario Draghi will serve as the next president of the European Central Bank, one of the world’s more important central banks, and will help steer the European Union through a sovereign debt crisis that threatens to sweep across Greece, Portugal, Ireland, Spain and perhaps Italy and other countries.
Draghi currently serves as governor of the Bank of Italy and will succeed Jean-Claude Trichet, of France, when his term expires at the end of October, The New York Times reports.
The European Central Bank develops and implements economic policy for the 27 states making up the European Union. The bank’s main purpose is to control inflation and ensure financial stability. In previous interviews, Draghi has gone on record to say monetary policy should “first and foremost be geared toward price stability,” the Times said.
Draghi has chaired the European Union Financial Stability Board, a panel that is developing rules to prevent future financial crises, and is expected to maintain that role, the Times said. He has developed a reputation for being cautious and deliberate.
The European Central Bank, headquartered in Frankfurt, Germany, was established in 1998 and began exercising its full powers when the euro currency was introduced on January 1, 1999.
To achieve its mission the European Central Bank works with the central banks in every country in the European Union. Together, the institutions form the European System of Central Banks.
The European Central Bank also facilitates close cooperation between central banks in the eurozone, a term describing the 17 European countries that have adopted the euro. The cooperation between this smaller, tighter group of banks is referred to as the “Eurosystem.”
The European Central Bank’s role includes setting key interest rates for the eurozone and managing the area’s foreign currency reserves. The European Central Bank buys and sells currencies as needed to keep exchange rates balanced, and also authorizes central banks in the eurozone countries to issue euro banknotes.
The European Central Bank has three key decision-making bodies. The Executive Board overseas day-to-day management of the bank. The Governing Councils sets eurozone monetary policy and fixes the bank’s prime rate. The Governing Council includes the six executive board members, plus the governors of the central banks of the 16 eurozone nations. The General Council helps advise and coordinate the work of the European Central Bank.