mario draghi : luigi einaudi and economic freedom address by mr mario draghi, governor of the bank of italy, at the presentation of the book luigi einaudi : selected economic essays, italian embassy, london, 17 october 2006. * * * ladies and gentlemen, let me thank the ente einaudi for the taking the initiative of having a selection of luigi einaudi ’ s works translated and thus introduced to a non - italian public. i should like to congratulate the editors – riccardo faucci, luca einaudi and roberto marchionatti – the translators and all other contributors for a job magnificently done. luigi einaudi had a long, very active life. when he published his first essay in 1893, giuseppe verdi had just completed his falstaff ; when he died, aged 87, federico fellini had just shocked italians – and possibly even britons – with la dolce vita. a key actor in italian public life, he passionately believed in the interaction between italian, european and american intellectual circles. he was friend to people like hayek, huizinga and ropke ; he was instrumental in getting many authors translated into italian, among them beveridge, and he carried on an intense activity as a consultant of the rockefeller foundation, with great benefit for many young italians who could study in british and american universities, even during the fascist time. during three decades he was the economist ’ s correspondent from italy, so that it was also through his eyes that politicians and business leaders of the world perceived italian affairs. einaudi is certainly difficult to sum up in a phrase. he was in turn economist, historian, journalist, wine maker, bibliophile, central banker, politician, statesman. he has left literally thousands of pieces of writing. if i have to single out the one reason why he made such a profound mark on the intellectual and political history of italy, that is his faith in a fundamental idea : man is fallible ; lawmakers and planners are no less fallible than other humans ; legislative and administrative commands often fail to attain their goals or have unintended consequences ; man must be free to experiment, to try new solutions for old problems. he extolled “ the beauty of the struggle ” : between people, ideas and market players, even between social classes ; individual and collective effort and competition engender progress ; excessive regulation, forced collectivism and decisions from above hinder it

normally, to allow our monetary policy to be effective throughout the euro area. otherwise, there would be instability, and that would have a negative effect on all member countries. all governments have committed themselves to being ready to accelerate fiscal consolidation. we are following this very closely in liaison with the commission. faz : what happens if, for example, the greek people refuse and the government breaks its austerity promise? do you not need a plan b? trichet : let us look back. since the euro was launched, the ecb has been preaching that the stability and growth pact is a cornerstone of emu. i repeat this at least once a month. the governments of germany and france in particular wanted to get rid of its rigour in 2004 and 2005. we rigorously defended the pact and avoided its de jure dismantling, against the wishes of the heads of state and government of large euro area countries. now, the ecb has demanded a very serious adjustment programme from greece, an adjustment programme that is very much in the country ’ s own interests. faz : however, there is a risk that one of the countries whose bonds you are buying will not be able to service its debts. what then? trichet : we are in the field of governments. there are three levels of government responsibility. first, accelerate the necessary and indispensable fiscal consolidation. second, exert strict surveillance of peers within the eurogroup – i. e. euro area governments. third, if tensions emerge despite the first two levels of responsibility, stand ready to intervene through the financial stability mechanism. faz : if that is the case, why is the ecb propping up the bond markets? would it not be better for an institution to be created which the governments finance and are responsible for? trichet : we are not propping up the bond markets. that is not our objective. we are ensuring the effectiveness of monetary policy. on 6 and 7 may, the days immediately prior to the decision to purchase bonds, the markets were massively disrupted, and market participants all over the euro area and the rest of the world observed this situation, which was deteriorating extremely rapidly. this was a very serious situation, in which we had to intervene in order to preserve, as i said, the integrity of the monetary policy transmission mechanism. faz : so why has the president of the bundesbank, axel weber, distanced himself from the purchase programme and voted with other members