Editor's Note: Nicolas Jabko is associate professor of political science at Johns Hopkins University and at Sciences Po-Paris. The views expressed in this article are solely those of Nicolas Jabko.
By Nicolas Jabko, Foreign Affairs
The anxiety surrounding the G-20 meeting in Cannes this week only deepened when Greek Prime Minister George Papandreou called for a popular referendum on the debt agreement reached between his country and its foreign lenders, placing the deal in jeopardy. Although Papandreou soon called off the vote, fears of a Greek default highlighted a critical transition at the top of Europe’s banking system. The accession of Mario Draghi, the former governor of the Bank of Italy, to the presidency of the European Central Bank will help decide how the Europeans will address the fundamental problems at the root of the current debt predicament.
Draghi is replacing Jean-Claude Trichet, who is stepping down after eight years on the job. Trichet made the ECB a respected and powerful institution. Only the U.S. Federal Reserve currently surpasses the ECB in steering global market expectations, and Trichet himself became a central figure in EU policymaking and an indispensable partner to European governments. Yet he is retiring in the midst of an emergency. Draghi immediately asserted himself as he took the helm, lowering interest rates by a quarter of a point, to 1.25 percent. But he may need to expand the ECB’s role even further to prevent a catastrophe in the eurozone. FULL POST