July 2012. The euro crisis is at its peak: Greece, Ireland and Portugal have already been bailed out, and the 17 members of the single currency have just agreed, together with the IMF, to provide up to another 100 billion euros to rescue Spain’s banking system. Hedge funds and other speculators now have Italy, the euro zone’s third-largest economy, in their sights: with 2 trillion euros in debt, it’s too big to rescue and too weak to survive on its own. Europe’s 13 year-old currency experiment is about to explode.
A diminutive Italian with a steely gaze takes a stage in London and, after five minutes of blandishments about euro zone reform, delivers a line that will become the stuff of both legend and lawsuit.
“Within our mandate—within our mandate—the ECB is ready to do whatever it takes to preserve the euro,” Mario Draghi says, pausing before adding: “Believe me, it will be enough.”
The effect of the “whatever it takes” pledge is electric. It is, perhaps, the last time that global markets ever take a central banker at his word and bet the shop on it. Billions of euros that have been betting against the euro and Italy now find even bigger sums propping it up. A resounding blast of clarity, confidence and optimism sweeps through a world racked by doubt and fears of a new Depression.
Within weeks, the euro crisis is in remission as the European Central Bank President fleshes out a plan to protect governments from speculative attack by buying their bonds if they accept fiscal discipline (the so-called Outright Monetary Transaction program).
The world economy had been saved by an individual heroic act. Not even an institutional act but an individual one: unlike Ben Bernanke’s decision to unleash quantitative easing in 2009, Draghi hadn’t troubled to get the backing of his ECB colleagues for his all-important phrasing in advance.
But it proved to be an impossible act to follow.
“I did consider the OMT episode as a stroke of genius, but it led him down a path from which he could never turn back,” says Tuomas Malinen, a professor of economics at the University of Helsinki and chief executive of the consultancy GNS Economics.
Draghi subsequently transformed the ECB, greatly expanding its policy toolkit and its balance sheet. He offered cheap long-term loans to banks, and when the banks ran out of bonds to pledge as collateral, he loosened the ECB’s rules to let them pledge loans—a risky step since loans are much harder to liquidate in the event of a default.
He cut interest rates to below zero to howls of pain from eurozone banks whose profit that squeezed. Deutsche Bank chief executive Christian Sewing warned in September that the policy has “serious side-effects” and said further cuts were unlikely to result in any extra corporate investment.
But up to a point, the medicine worked. At his last press conference in September, Draghi took the credit for a six-year expansion that created over 10 million jobs. “The sustained growth for several quarters were by and large produced by our monetary policy. There was very little else,” he reminded his critics.
Much of that was due to the ECB’s decision, from 2015, to buy euro-zone government bonds.
But the big challenges of future-proofing the euro have beaten him. There is still no safe asset backed by the full credit of all its members, no common budget to speak of and no common deposit scheme to encourage confidence in the union’s banks.
True, none of that is strictly Draghi’s job: the ECB’s legal mandate is to maintain stable prices, something that it interprets as a consumer inflation rate just below 2%. But even on this measure, the bank is failing. At 0.8% in September, inflation has undershot its target by an increasingly wide margin over the last year. Core inflation has missed its target for much longer and is dependent on sudden swings in oil prices to nudge it up to the ECB’s self-defined target.
Additionally, Draghi’s penchant for quick and decisive action has got increasing pushback from more conservative thinkers on the ECB’s governing council—many of them the representatives of national central banks. After a bitterly disputed decision to restart quantitative easing last month, half a dozen of his colleagues publicly dissented.
Draghi’s critics, led by German central bank chief Jens Weidmann, argued that QE blurred the lines between monetary and fiscal policy—that is, between what central banks and governments should do to sustain the economy. But QE, which inflates asset prices and incentivizes governments to borrow and spend, has had direct effects on redistributing wealth, which is the province of governments.
Veterans of the ECB’s council were even more scathing, accusing Draghi of causing a “zombification” of the economy by keeping weak banks (and borrowers) alive. They also accused him of breaking the law with his decision in September to announce open-ended government bond purchases of 20 billion euros a month.
“From an economic point of view, the ECB has already entered the territory of monetary financing of government spending,” half a dozen French, German, Dutch and Austrian central bankers said in an open letter.
The irony is that prohibition dates back to when EU leaders such as Helmut Kohl were afraid that future politicians would put pressure on the central bank to finance their deficits. Instead, the pressure is going the other way: the ECB is now promising to buy bonds that governments in Berlin, the Hague and Helsinki don’t want to issue.
“If fiscal policy had been in place, or would be put in place, the side effects of our monetary policy would be much less, the action of our decisions today would be much faster and therefore the need to keep in place some of these measures would be less,” Draghi told his last press conference.
The man who stamped his mark on the ECB with such irresistible confidence is bowing out on a note of ‘If only…’
That may be a telling indictment of the failure of Europe’s politicians to use the time that Draghi bought them back in time. But after eight years of an almost hyperactive monetary policy, it’s equally telling that none of Draghi’s policies have had as big an effect as OMTs, the one he never used at all.
More must-read stories from Fortune:
—Maven, the company that slashed Sports Illustrated, has had its own share of financial woes
—Trump’s hosting G7 at Doral Resort raises questions about struggling property, Deutsche Bank loans
—What Warren Buffett’s move to increase his Bank of America stake says about the health of the economy
—How would you spend a universal basic income? We asked participants around the world—and their answers might surprise you
—Why JPMorgan Chase wants to give more former criminals a second chance
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.