Wednesday

22nd Feb 2017

ECB chief indicates upcoming help for Spain

  • "The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does," says Draghi (Photo: guysie)

Markets rallied after European Central Bank chief Mario Draghi on Thursday (26 July) pledged to do "whatever it takes" to salvage the euro and suggested the bank may buy more government bonds.

"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," he said during a conference in London.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Among these tools is a bond purchasing programme which had stalled this year after it helped to lower the borrowing costs of Italy and Spain in 2011.

Spain this week paid a euro-area record rate of 7.6 percent on its ten year bonds, despite the announcement of a eurozone bailout of up to €100 billion for its banks and more spending cuts worth €65 billion.

Draghi explained that as long as countries are paying higher interest rates than they should based on "factors" they can control, the ECB can intervene.

"To the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channel, they come within our mandate," he said.

His remarks mark a shift suggesting the ECB board next week may decide to resume the bond-purchasing programme that saw the ECB spend €210 billion on government bonds since May 2010.

The policy shift is not unexpected, however. The International Monetary Fund in recent weeks has suggested the ECB should intervene more forcefully to salvage the euro as it has enough tools to do so. And foreign diplomats Brussels earlier this month spoke of a "studied choreography" between EU governments and the ECB - first they have to do something for the bank to follow up with something in return.

Draghi indicated that this stage of the euro crisis - where market have lost confidence that the currency can work in the long run with so many divergent economies - it is important for leaders in the 17 euro countries to adhere to a long-term plan leading to a true economic and political union.

"The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does," he said.

"So the euro was a bumblebee that flew very well for several years (...) Now something must have changed in the air, and we know what after the financial crisis. The bumblebee would have to graduate to a real bee. And that’s what it’s doing."

The fundamentals of the eurozone are good, said the ECB chief, less inflation, less deficit and less debt than in the US or Japan.

With governments starting to reform their economies and at the same time work towards a true fiscal, economic and political union, "the euro is irreversible."

Euro-saving operations due within 'days,' says Juncker

Eurogroup chief Juncker has said there is "no time to lose," as the world talks about a eurozone breakup, with joint action by the European Central Bank and the eurozone bailout funds expected in the coming days.

MEPs approve Canada trade deal amid protest

Amid protests in front of the European Parliament's Strasbourg building and after heated debate among MEPs, the landmark trade deal with Canada was approved with a comfortable majority.

News in Brief

  1. Romanian parliament buries controversial corruption decree
  2. Dozens drown off Libyan coast
  3. EU ministers approve anti-tax avoidance directive
  4. Poland rejects EU criticism of court changes
  5. German nationalist leader met with Putin allies in Moscow
  6. German housing market overheated, says Bundesbank
  7. France invites three EU leaders for Versailles summit in March
  8. Greece agrees on new bailout reforms

Stakeholders' Highlights

  1. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  2. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  3. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  4. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  5. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  6. Centre Maurits CoppietersMinorities and Migrations
  7. Salzburg Global SeminarThe Child in the City: Health, Parks and Play
  8. UNICEFNumber of Ukrainian Children Needing Aid Nearly Doubles to 1 Million Over the Past Year
  9. Centre Maurits CoppietersThe Situation of Refugee Women in Europe
  10. Salzburg Global SeminarToward a Shared Culture of Health: Charting the Patient-Clinician Relationship
  11. European Free AllianceAustria Should Preserve & Promote Bilingual and Multinational Carinthia
  12. Martens CentreShow Your Love for Democracy! Take Part in Our Contest: "If It's Broken, Let's Fix It"

Latest News

  1. Should Europeans spend more on defence?
  2. Dieselgate: EU disappointed with VW's treatment of customers
  3. French police raid Le Pen's party office
  4. The Armenia-Azerbaijan war: A refugee's story
  5. Greece and creditors break bailout deadlock
  6. Internal EU report exposes Libya turmoil
  7. EU commissioner condemns 'delay' in post-Dieselgate reform
  8. Sweden fights back as foreign leaders make up bad news