France and Germany played a highly visible leadership role during the management of the Euro crisis and the efforts to design a reform governance framework for the Euro area. This article provides a conceptualization of this bilateral leadership, which is then applied to trace the process of Franco-German leadership during the ongoing crisis of the Euro area. Franco-German leadership grew ever more important as the crisis deepened. After the French presidential election of 2012, however, the divergences between the two core states of the Euro area deepened and made the exercise of joint leadership more difficult to achieve. I consider this leadership role to be based on a compromise by proxy logic in which France and Germany, starting from divergent positions, strike bilateral compromises acceptable to other member states that feel their own interests are represented by either France or Germany. Their common capacity to find suitable remedies to cope with crisis, however, is not beyond doubt. The Franco-German approach followed an additive logic, combining the temporary and permanent financial support schemes-a French preference-with a concomitant strengthening of fiscal rules advocated by Germany. In the end, the two governments did not develop a common comprehensive strategy based on a shared conceptual framework.
The financial woes experienced by the Monte dei Paschi di Siena (MPS) and by a handful of other Italian banks in which foundations have played a prominent role offer an opportunity to reflect on three interrelated topics. The first issue is the evolution of the Italian banking system and banking legislation over the past decades to explain the rather distinctive governance structure of these banks. The second issue is the unfolding of the sovereign debt crisis in the euro area, which set the broader context in which the MPS scandal and the subsequent financial troubles of other banks took place. The third issue is the main response of the European Union and euro area to the sovereign debt crisis, namely, the proposal to create an EU banking union, which in turn triggered strong supervisory actions by the Bank of Italy in preparation for the handover of banking supervision to the European Central Bank.
Kenneth Dyson and Lucia Quaglia
After prolonged negotiations, on 24 June 2011, the governor of the
Bank of Italy, Mario Draghi, was appointed president of the European
Central Bank (ECB) as successor to Jean-Claude Trichet. His mandate
runs from 1 November 2011 to 31 October 2019. Draghi’s appointment
was consistent with a long-standing practice of Italian politicians and
officials seeking to engage with the process of European integration
by ensuring that they were “sitting at the European top table.” In the
context of the euro area, sitting at the top table for Italy was initially
about gaining euro entry as a founding member state in 1999 and,
subsequently, about having strong Italian representation in the governing
structures of the euro area, particularly the ECB. Once the
sovereign debt crisis became contagious in 2010–2011, it meant ensuring
that financial markets drew a clear distinction between Italy and
periphery member states such as Greece and Portugal that suffered
from sovereign debt distress.