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ECB President Mario Draghi: Government Gambling With Taxpayers’ Money Is ’Prudent’ Practice

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(EIRNS) — Answering a question from EIR at the ECB monthly press conference today in Frankfurt, ECB President Mario Draghi defended government investments in derivatives as a "prudent" practice, saying that what is important is that there be "transparency" and "accountability."

The ECB was expecting a question on press reports about Italy losing EU8 billion in derivative contracts bought when Draghi was director general of the Italian Treasury, and had prepared a written answer.

EIR Strategic Alert co-editor Claudio Celani asked that regardless of whether Draghi was involved and what the real losses are, "[f]rom the standpoint of the future Regulator Maximus of the European Banking Union, do you think it is prudent for national Treasuries to invest taxpayers’ money in derivatives, in gambling bets?"

Draghi answered instead on his involvement, claiming that: 1) The operations carried out when he was at the Treasury have all been closed; and 2) They were known and praised by Eurostat and the EU Commission. He also replied to unasked-about allegations that these derivative operations were made to embellish the figures of the Italian budget, in order to comply with the Maastricht criteria 3% deficit rule as a condition to enter the euro: "They always have been made in the interest of the Italian Treasury," Draghi said, and they are part "of an active management of public debt."

Asked whether he would call them "prudent," Draghi answered: "Yes, when the Treasury retains them so, yes. I’ll give you an example: If you issue in foreign currency, you want to hedge yourself against the exchange rate risk."

Draghi’s statements must be checked. First, it should be checked whether all his derivative operations have been closed — and if so, whether they have been closed at a loss like the Morgan Stanley derivative closed by the Monti government in 2011 with a check of over EU3 billion.

Secondly, how much debt do you hedge with EU160 billion in derivative contracts, as this is the figure officially reported of derivatives exposure of the Italian Treasury?

The exchange is here, at minute 16:14 [ccc]