Critics in Europe are very uneasy about the new Italian ECB chief, the Greek premier and the prime minister-designate of Italy’s past or present relations with the Goldman Sachs bank. Key European crisis figures Mario Draghi, Lucas Papademos and Mario Monti all have backgrounds with ‘Government Sachs’.
Goldman Sachs is seen by many as among the most political firms on Wall Street. It was dubbed ‘Government Sachs’ in the US, as many of its staff have held high level US Government jobs.
Mario Draghi, a former World bank and Italian Treasury director with a PhD in economics from MIT, was the Goldman Sachs Europe branch vice-president from 2002-2006, before he became governor of the Central Bank of Italy. By this time, Goldman and other top Wall Street firms had designed derivative deals which disguised debt for Italy and Greece. Draghi said the deals that made it possible for them to join the euro even though they did not meet the criteria were made before his time with Goldman Sachs.
Lucas Papademos — whose degrees include MIT — has also come in for critical scrutiny over such financial manoeuvring. He was not a Goldman Sachs employee, yet was governor of the Central Bank of Greece from 1994-2002, and worked hard to secure his country’s successful entry into the single currency club.
Yale graduate Mario Monti has been an international advisor to Goldman Sachs since 2005. Before that he was in the European Commission for ten years, first in charge of EU internal market workings, then holding the powerful competition portfolio.
Goldman Sachs faces serious exposure to big lawsuits stemming from the subprime crisis — from US and European plaintiffs — as well as suspicion of fraud in Europe, notably linked to the Greek financial disaster. And it looks like what Italian economist Gustavo Piga called “a mortal embrace that started between governments and banks” is far from over.
Yet now Europe finds so-called ‘Government Sachs’ figures in extremely powerful positions, in both national government and the institution of the European Central Bank. Questions of possible conflicts of interest and Goldman Sachs legal access to the levers of state are stacking up.