Draghi helps out Obama campaign

September 6, 2012 10:26 pm

By Robin Harding in Washington

(Financial Times) - Barack Obama’s chances of re-election as US president rose on Thursday and the words that did it were not his but Mario Draghi’s.

Long before Mr Obama stood up to accept the Democratic nomination in Charlotte, North Carolina, the head of the European Central Bank had sketched out a new plan to buy the bonds of troubled eurozone countries.

That will not move the polls; it will not move a single vote. But Mr Draghi has lowered the gravest of risks to Mr Obama: a pre-election meltdown in the eurozone that would have blown up banks, pulverised Wall Street, and routed a fragile US economy back into recession.

If that happened, it would not be Mr Obama’s fault, but he would get the blame. Just as the failure of Lehman Brothers doomed his rival John McCain in 2008, a eurozone implosion would create economic odds too great for Mr Obama to surmount.

The eurozone has barely been mentioned in the US election campaign – swing voters in Ohio care little for Spanish bond yields – but economic advisers to Mr Obama and his Republican rival Mitt Romney know its wild card potential.

Behind the scenes, Mr Obama’s economic team has spent much of the past year fretting about the eurozone, and working every diplomatic angle to push the Europeans towards a credible solution.

The ECB’s latest action is not the whole solution, but it is a forward step, and one that the central bank hesitated over before taking. Markets rallied strongly when it did.

Dangers remain, not least from Greece, the world’s slipperiest economic banana skin. But if Mr Obama does win in November, he should thank not just his own elegant words, but the less-than-soaring rhetoric of an Italian central banker.

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