 Ladies and gentlemen, it gives me a great pleasure to be here at Davos with Mario Draghi, President of the European Central Bank. On a personal note, I should say that I've known Mario for more than 20 years. When I first met him, he was a senior official at the Italian Treasury, one of a group of European technocrats, if I could use that word. Sure. Who were involved in putting together the architecture of the single currency. That was back in 1996. Today, he is in charge of the European Central Bank at the heart of macroeconomic policymaking and at the heart of the current crisis. It could be a crisis of confidence. It could be many other things, but we're going to talk about some of these things over the next half hour. Mr. President, if we could just start with the important interest rate hike by the Federal Reserve last December. Many people thought at the time that this signalled, if you like, the beginning of the end of unconventional monetary policy, and that as a means of generating economic growth, this was a sea change. Looks slightly different today. How do you see the picture? Did that single a very important shift? Well, it signaled the improvement of the economic situation, especially in the United States, but to a somewhat lesser extent also in the rest of the world. We usually don't comment on other central bank decisions. As someone said in England in a different context, we don't do central banks. He said something else, of course. We don't do religion. Exactly, yeah. But one has to say that the decision, the Fed took, was appropriate given the position of the US economy, the recovery cycle, and it was perfectly communicated and flawlessly executed. So you'll forgive me for doing central bank once. In a while, I think that's fully deserved. Now, you obviously made some important statements yesterday, and you've put me under severe pressure, not to pressure you or not you, but to repeat the very carefully parsed performance of yesterday. But can you give us a sense from the ECB, given the Fed decision, how concerned are you that there seems to be a slight misalignment between the way American monetary policy is going and the way European and Japanese monetary policy? Well, let me step back. The different monetary policies reflect the different positions of the economies in the recovery cycle. The US recovery is more advanced than what's happening in the Euro area and in Japan, and so it's entirely natural that monetary policies do differ, and they will be on a diverging path for a while. And this will be reflected in different interest rates, but it's a normal process. So the spillovers between the two major jurisdictions would be adequately coped if the monetary policy decisions are right. But do you think that something profound has changed in 2016? No, well, 16. The new year for many people has started very badly. I'm not just talking about the stock markets, but there seems to be a different assessment of economic prospects, not just in China, but also even in America, where people generally thought the recovery was steady and underway. What's happened in the new year of 2016 that seems to have changed sentiment? Well, I think it's too early to speak about changing sentiment. There are market vibrations, gyrations. There is certainly a heightened sensitivity to risk, but it's too early to say the perspectives are changed. As far as we are concerned, we basically see a recovery that is continuing at the modest pace, but regular one. It's a recovery that's driven by consumption, differently from other occasions in the past, where there were small recoveries that wouldn't last long, driven especially by exports. Now it's been driven by consumption, and the drivers of this economy, of this recovery, are first and foremost, I'll say, our monetary policy. And also to a great extent by oil prices that support real disposable income. And also by the fact that the overall stance of fiscal policy in the Euro area has become broadly neutral, if not slightly expansionary. So all these three drivers should ensure a continuation of the recovery. There is one fourth driver ahead which hasn't still yet deployed its effect. And that is the probable increase in government expenditure that will be necessary to cope with the refugees in Europe, really. So on the growth on the opposite side, I don't think there is any reason to think that perspectives are changed. On the inflation side, however, things are different. And I've been commenting on that quite extensively in the past few days, but certainly the situation is sort of gives less reason to be optimistic from the time being. Is that largely because of the collapse in oil prices or there are other factors? It's mostly because of the collapse in oil prices, but also because of the revision of the downward revision in the growth perspectives of the emerging market economies. Which, by the way, is certainly having an impact on oil and commodity prices as well. And so the issue there is how we look basically at three factors there. First of all, we look at what we call materiality, namely the size of these effects. And then we look at how persistent they are. Of course, it's very different if they are temporary. And third and most important, we look at what we call second round effects. Namely how these lower oil prices feed into the prices of other components of the inflation, of the price index basket. Namely services, manufacturing, and so on. So that's what we look at. I'd like to ask you a non-economic question if I may. It's a challenge. I just wonder whether sometimes, from your perspective, we just expect too much of central bankers. Very difficult to answer. You know, I think most people, certainly central bankers, try to perform their tasks at their best. Try to do what is necessary based on the analysis and assessment of the situation. And try to assess also the risks that their policy measures would entail, the so-called side effects. But in the end, they are bound by a mandate. And so this is a relevant question, but it should not be used as a pretext not to act. It should not be used to say that, I'm sorry, it's not my responsibility, it's yours. The first and foremost obligation that all central bankers have is to act based on their mandate, which in our case is price stability. You've been very clear about that, but let me just go back to that point I made at the beginning, which is you were one of the co-architects along with Jean-Claude Trichet, Nigel Wicks, and others who put together the blueprint under political instruction for the euro. Do you feel a strong, deep, abiding personal commitment to try to keep the euro together? Is there something else motivating you, or is it just that mandate? Well, you're actually, I mean probably, we are not the architects, we were humble bureaucrats at the time, we were actually... Emphasis on humble. Humble, yes, exactly. Emphasis on humble. And as you said, we were actually executing instructions that gain our best. And certainly we all feel committed. I haven't seen Nigel now for many years, but I'm pretty sure if we were to meet, we would feel equally committed to the European project as I do, or Jean-Claude Trichet does. And he's British. And he's British, that's right. I promise not to ask you about Brexit. Right, please don't. So we do feel committed to the European project. We spent most of our lives really working on it. But let me just go back to, again, something very interesting, under-reported in the first few days of this year, that Wolfgang Scheuble, a committed European too, has said twice that we shouldn't ask too much, or put too much pressure on the European Central Bank. That must have been music to your ears. Well, it's certainly the right thing to say. It's an appeal to his colleagues, to the European leaders, to undertake the necessary reforms to make the euro area more homogeneous and more competitive and more resilient eventually to all shocks in the future, and certainly more resilient than it was before the crisis. Because in a way, Mr. President, what you and your colleagues, because I stress this is a collective body at the European Central Bank, that your pledge to do whatever it takes is essentially a means of creating space for the politicians to act, to take the supply side reforms to generate economic growth. Is that the right way to say it? Well, you see, again, it's a very political way to look at things. I can only restate what I said before, namely, we look at what needs to be done based on our mandate. Now, whether this buys political time to do the reforms or not, it may well be, but it's not a relevant aspect as far as we are concerned. It's really up to the others to act and to decide whether they have enough time or not. But it's not up to the Central Bank to have these considerations in mind when we decide monetary policy. But to use the analogy, which is sometimes used of the U.S. Supreme Court, you are not at the Central Bank monks in cells. No, certainly not. But we got to be careful that to have our attention and focus on the mandate and not to get lost into the many, many other political considerations that would lead us to deviate from our mandate. Okay, let's turn to the question of, well, it's not a question. It's probably one of the most serious issues facing the European Union today, which is the refugee crisis. I mean, extraordinary numbers of people coming into the European Union, particularly Germany. One million this last year, perhaps another million this year. Do you see this as an existential threat to the European Union in the sense that Schengen may well be suspended, a threat to the single market, or do you see this as perhaps an opportunity? Let me say that each time I'm asked a question about this problem, the first reflection that comes to my mind is how narrow and limited is an economist's perspective with respect to this, and how little we know about this issue. What the refugees are for Europe are both a challenge and an opportunity. It's a challenge for sure, and it would be foolish to ignore the size, the extent of the challenge. Our society will be changed by this, in which direction we can only guess. It's also premature to know how long it will take to transform this challenge in an opportunity. But if there is determination and confidence, you see, that's the most important thing, because the size of the challenge could actually undermine the confidence, make fear prevailing over any other consideration, and then the challenge is lost. I don't think we are there, actually we are all working to make it into an opportunity. And I think if we go back to what I was saying, hinting at before about the recovery, the expenditure, the government expenditure that will be needed to cope with this challenge could actually turn out to be the large public investment project we had for a great number of years. And possibly, as you say, an extra stimulus to growth, because actually the growth story in the Eurozone over the last ten years has been pretty poor. I mean, to quote Larry Summers, it's a terminally tepid growth. Yes, and certainly one of the reasons for such low growth is the demographics. Certainly it doesn't help, and this might change. But again, we shouldn't ignore the size of the challenge, the difficulty of this challenge, namely, and that has to do with a variety of things, the degree of education of the refugees, the age, the countries themselves, especially I would say the countries themselves, how prepared they are, how willing they are to invest in this project, how organized they are. The impression is that, and finally, and perhaps right now, even most importantly, how willing they are to cooperate, because it's quite clear that without cooperation it becomes a challenge that it's hardly won. There hasn't been much cooperation so far, though, on the refugee crisis in terms of European burden sharing. It's not happened. Well, I think it will happen. I'm actually pretty confident that it will happen, that the reasonable agreement will be found. And the reason why I'm confident is ultimately the inevitability of this phenomenon will make people understand that there is no choice other than coping with vision, boldness, courage, without fear, with the process itself. Not to cooperate means to ignore the challenge and to ignore it that will not make it disappear. If we look back just a year ago, all the talk was about Grexit. That seemed to be the existential question for the Eurozone 12 months ago, much has happened since terrorist attacks, as you say, the refugee crisis. Can we just have a word on Grexit? Is that now off the table? Well, we are in a much better situation than we were, say, last June. The Greek government undertook significant progress, made significant progress in making reforms in fiscal consolidation. And what we call the two sets of milestones of this program have been achieved. Negotiations are taking place this very moment. There are mostly, I would say, three areas where the discussions are taking place. One is what are going to be the fiscal targets for 2018 and 2019. The second point is the pension reform, which seems to be a key point in the policy discussions, namely that the pension was very simple to say. Of course, it's very difficult to do, but it's namely that the pension system should be sustainable. And the third point is the financial sector reforms. Now, Greek banks have been capitalized, but there is still a high level of non-performing loans. So how to deal with this problem will require some changes in the financial legislation and a process whereby these loans could be sold so that the banks could actually fully engage in giving credit to the private sector of the Greek economy. And discussions, as I said, are taking place this very moment. I'm pretty sure that an agreement will be found so that the first review could be successfully concluded in speedily and successfully concluded. And speed is of the essence, by the way, because the sooner this is concluded, the sooner the Greek economy will go back to a normal situation where the private sector will get credit, and also the government will get enough financing to undertake the public investment projects that Greece needs. One of the problems, of course, as I think it was George Soros said last night, Greece is a nation with no state. I'm not sure I understand. Well, is George in the audience? No, he's not. This is actually, he didn't say that. I just misquoted him. Sorry, George Soros. The problem being that the state just isn't strong enough. Yeah, but that can be said on many other countries. Why are you looking at me? I think that was a central banker's elliptical comment about Scottish independence. Don't make me say things. If you look forward, though, to 2016, what are the priorities for the central bank? Well, I kind of briefly mentioned them before. I mean, just as far as we are concerned, the continuation of the economic recovery, and second, the convergence of the inflation path towards our objective of rate of inflation, which is close but below 2%. And as you say, you are somewhat short of that 2% target. Indeed. Just how much ammunition have you got in your pocket? Well, we've plenty of instruments. I made these comments yesterday during the press conference, so there's no point in repeating them, and we've plenty of instruments. And especially, we have the determination and the willingness and the capacity of the Governing Council to act and deploy these instruments. Over the last three and a half years or so since you've been in office. Longer. It's longer, four years. Longer, four and three months. By the way, this is the closest you'll get to a central bankers' confession. He's counting every minute. But has there been anything, I know you don't normally engage in such things, but if you could share with this audience, one or two things that you've learned or that have surprised you since arriving in Frankfurt? Well, I don't know, really. I mean, I had many jobs in my life, and this was a question I was often asked, was there anything that surprised you in this job? And I was never able to answer really. It's probably, things do surprise me after they have happened. But at the time, I mean, I have no idea. I mean, you see, if you live in the present, you're hardly surprised. And this is a job where you do have to live in the present. Yeah, it's better, so yeah. That's probably better than living in the past. I want to just ask you one more technical question, Mr. President. This is this issue of banking supervision. At the moment, there are new rules which have come into place on bail-ins for banks and the assessment of non-performing loans. And you've had quite a serious problem in Portugal and an issue also in Italy, in your native country. It's always difficult, by the way, for the head of the central bank to how he deals with, or she would deal with the country back home. But can you just tell us, I mean, is the ECB see this question of heavy banking supervision, something as a poison chalice, or what? Just since you mentioned the two countries, first of all, the two situations are different. But one thing that's probably not sufficiently considered is that the ECB is not the resolution authority. So that means that the way these bail-ins are being implemented in different countries depends, first and foremost, on the resolution authority, which, until the end of last year, was the national authority. And there is no uniform rule or regulation until now that tells how to implement bail-ins in the same way across different countries. So he had one way was done in Portugal, he would get another country, they may well do it a different way. And so my auspice, my wish would be that the current directive then is translated into a regulation, which actually ensures uniformity of bail-in implementation across countries. Now having said that, now there was a big confusion, I think, in my native country. And the key thing is, we did, as a supervisor, we did the comprehensive assessment, which terminated a few months ago. This assessment of the bank situation in the whole of the Euro area identified fully all the MPLs at that time and identified the necessary provisions and the necessary capital increases following that assessment. Now the SSM, the supervisor, sent a questionnaire, which apparently was read as implying new requests. There was a mistake in reading. The questionnaire only wanted to look on how banks deal with MPLs because we are the first to be aware that it takes years to deal with the MPLs. It's not a matter that can be dealt with urgency. It's a good example, it's given by Ireland. Ireland has been struggling with the MPLs for years. So the supervisor's objective was to see what are the different national practices that are used to deal with MPLs. And then later on we could orient towards the best practices. Nothing more than that. So it's not going to be any new unexpected request of provisions or capital coming stemming from this exercise. And I did say this in pretty clear terms yesterday and I restated today. Thank you. I'd like to now ask what might be described as a historical philosophical question. If you look at Treaty of Rome, first invoked the notion of an ever closer union. And if you look at the evolution of the European Union over the years, you've had the single market and then the single currency. And looking at the eurozone we talked about this principle of convergence. Do you now, looking back and living in the present as you do, do you think that this notion of linear development is actually wrong? It's not all moving towards an ever closer union. It's something different. Well I think I would, I don't think people when they said ever closer union, I don't think they had in mind a linear process. They had in mind a process which probably because these people were reasonably intelligent. They would also imagine as quite bumpy. And that's what we are living through but it's no question even in the account you just made about the fact that this union has become closer and closer. Through going through one crisis after another one. And I think someone said don't let a good crisis waste. Don't waste a good crisis. I think you're quoting Churchill again. Yeah but wrongly I guess. No, no, no. Well, anyway. You need a pipe. I need a pipe. I'm just conscious of time. But the, just the, the, if you think of events today. Yeah. This is, we are living in a, in a, in a crisis. If you think of the refugee problem, the terrorist attacks in Paris. The notion that Schengen may be, but it's suspended in name. I mean, these are really multiple threats to, to the process. And in that sense, it's me talking not you. It puts almost a bigger premium on, on the institutional, on the institutions that you have as a, as a kind of force for stability. Is that something you'd be able to comment on or? I can, I can actually make a short comment on that. It's certainly true. It is certainly true. It's, it's a moment when, when all the European leaders are trying to, are trying to drive their people closer to the common European interest. In a way that is respectful of democracy. What has changed with the crisis? And what, what is always true with crisis is that there can't be a purely elitarian process towards. Elitist, yeah. Elitist process towards, but has to be a fully democratic process. And that's what's happening. That's what crisis actually produce often. And that's why after each crisis is coped and resolved, the democracies are stronger. And the common effort, the common journey towards a closer union is getting more and more determined. Mario Draghi, thank, thank you. I won't call you Super Mario, but. No, please. Thank you. Mario Draghi, thank you very much. Ladies and gentlemen, I hope you've enjoyed the conversation. It's been very good to see you. Thank you. Thank you.