On a warm summer day on the eve of the Olympic Games, European Central Bank President Mario Draghi stood up at a business conference in London and dropped a bombshell.“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi told the audience in Lancaster House, a grand building in central London, then paused for effect. “And believe me, it will be enough.”Global markets, full of talk of a euro zone break-up, rallied sharply on Draghi’s unexpected message. Just as shocked were the ECB boss’s aides and his colleagues on the bank’s policymaking Governing Council, none of whom knew Draghi would make such a sweeping promise.“Nobody knew this was going to happen. Nobody,” one senior ECB official said of the speech.The truth was, the speech was just the beginning. Draghi was in no position to guarantee “whatever it takes.” His words were a gamble that set off weeks of frenzied backroom diplomacy and public sparring that would severely test the relationships of the main protagonists in the euro zone crisis.Through conversations with senior ECB officials and leading political actors in the euro drama, most of them on condition of anonymity, Reuters has pieced together a detailed picture of the negotiations that led from Draghi’s late-July speech to his September 6 announcement that the ECB stood ready to buy “unlimited” amounts of bonds issued by the most stricken euro members.Key to Draghi’s gambit was peeling off enough members of the ECB’s Governing Council. One of them, Jens Weidmann, head of the powerful Bundesbank, has become a vocal critic of Draghi’s plan. He and his hawkish German colleagues believe it will compromise the ECB’s sacred independence and stoke inflation, a taboo in Germany since hyper-inflation in the 1920s gave rise to the Nazis. Yet getting Germany on board was essential. Europe’s biggest economy, it has served as the bloc’s paymaster during the crisis. If Draghi’s policies ran up against a German wall, they would surely fail.In the end, Draghi won over everyone on the council but Weidmann, and crucially secured the backing of Europe’s dominant leader, German Chancellor Angela Merkel.“Mario is someone who, when he is convinced he’s right, is not worried about going ahead and saying he’s right,” said Francesco Giavazzi, an Italian economics professor who has often worked with Draghi since they studied together at the Massachusetts Institute of Technology (MIT) in the 1970s.This is the story of how Draghi got his way.PRUSSIAN HELMETWithin hours of the London speech, the ECB president’s surprised colleagues had recognized its significance and leapt into action.Joerg Asmussen, a 45-year-old former deputy finance minister who had joined the ECB in January, alerted Merkel.Asmussen would emerge as a key player in the hectic weeks to come. A pragmatic German with strong European leanings, he had close ties to all the main players - Draghi, Merkel and Weidmann - giving him leverage and putting him in a unique position to help forge consensus.While Asmussen informed his Berlin contacts, his French colleague on the ECB board Benoit Coeure sent word to Paris. Within 24 hours of Draghi’s speech, Merkel and French President Francois Hollande had spoken by phone and issued a statement echoing Draghi’s promise.It was a first sign that the Italian’s risky, and still murky, plan might fly.But the maneuvering had only just begun. On the other side of Frankfurt, in the 70s-era cement colossus that houses the Bundesbank, officials were seething at Draghi’s London speech and demanding he come clean about his intentions.Early last year, the head of the German central bank Axel Weber had resigned abruptly in protest at the crisis-fighting policies of Draghi’s predecessor, Jean-Claude Trichet. The Frenchman had embarked on the ECB’S first-ever round of sovereign bond buying to drive down the borrowing costs of heavily indebted countries like Greece, Portugal, Spain and Italy. Weber, who had been in line to replace Trichet at the top of the ECB, denounced this as dangerous money printing to finance profligate states.When Weber bolted, it opened the door to both Draghi and Weidmann, a former student of Weber’s who had served as Merkel’s top economic adviser in Berlin.The youngest Bundesbank president ever, Weidmann was now in the same difficult position as his mentor had been. The ECB was on the verge of what looked like a new and ambitious bond-purchase program.Draghi needed to ensure Weidmann did not flee as Weber had. If he did, it might set off a backlash in Germany that would kill his plan even before it got off the ground.The two met for coffee in Draghi’s office on the 35th floor of the Eurotower on July 30, four days after the speech.
