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UPDATE 2-EU leaders appoint Draghi ECB president until 2019
June 24, 2011 / 6:14 AM / in 6 years

UPDATE 2-EU leaders appoint Draghi ECB president until 2019

* Draghi appointed to be ECB president until end-Oct 2019

* Issue of other Italian on ECB executive board unresolved

(Adds details on Bini Smaghi)

By Luke Baker

BRUSSELS, June 24 (Reuters) - European Union leaders have formally appointed Italy’s Mario Draghi to be the next president of the European Central Bank, draft conclusions from the EU summit showed on Friday.

The decision clears the way for Draghi, 63, to take over from Jean-Claude Trichet when the Frenchman steps down at the end of October after eight years in the job.

“The European Council appointed Mr Mario Draghi president of the European Central Bank from 1 November 2011 to 31 October 2019,” a draft of the conclusions obtained by Reuters showed.

At a news conference late on Thursday, Herman Van Rompuy, the president of the European Council, said Draghi had not been discussed during the first day of the two-day summit but that his appointment was on the agenda for Friday’s talks.

In recent weeks, French officials had expressed concern about Draghi’s appointement, worried about Italy ending up with two members on the ECB’s executive board. Lorenzo Bini Smaghi is already on the six-member panel, which sets interest rates along with the 17 other euro zone central bank governors.

French officials had suggested that Bini Smaghi should replace Draghi as head of the Italian central bank, opening the way for a French person to be appointed to the board.

In April, Italian Prime Minister Silvio Berlusconi promised French President Nicolas Sarkozy that Italy would yield Bini Smaghi’s place on the ECB board to a French candidate, in return for France’s backing of Draghi for president.

The trouble was that Berlusconi did not first consult Bini Smaghi, whose eight-year ECB term ends in May 2013. Bini Smaghi has refused to quit, creating an uncomfortable situation for Berlusconi that remains unresolved. [ID:nLDE75L1K9])

Officials said the expectation now was that Italy would resolve the situation with Bini Smaghi by the time Draghi takes over in November, although it remains unclear how.

While Draghi, a highly respected economist and banker, has won widespread backing for his candidacy in recent months, there were concerns earlier in the process that his nationality and past employment with Goldman Sachs (GS.N) could hinder his pathway to Europe’s top central banking job.

In appearances before the European Parliament’s finance committee, Draghi has made clear that his role at Goldman Sachs between 2002 and 2005 did not involve selling financial instruments but was largely an advisory position.

He has also underlined his experience in overseeing Europe’s Financial Stability Board, and emphasised the common thinking he shares with Trichet on monetary policy and on the risks to the financial system of a failure to tackle Greece’s debt crisis.

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