Friday

16th Nov 2018

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

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.

Italy defiant on budget on eve of EU deadline

Italy would be committing economic "suicide" if it fell in line with EU rules, its deputy leader has said, in a sign that Rome has little intention of bowing to pressure ahead of Tuesday's budget deadline.

News in Brief

  1. US warns EU banks and firms against trading with Iran
  2. Merkel urged Romania not to move embassy to Jerusalem
  3. Protesters call for Czech leader to step down
  4. Former German chancellor labelled 'enemy' of Ukraine
  5. French lead opposition to Brexit deal on fisheries
  6. Private accounts of Danske Bank employees investigated
  7. UK's May defends Brexit deal to MPs, after ministers resign
  8. Brexit MP calls for 'no confidence' vote on May

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. How the EU commission got tunnel vision on self-driving cars
  2. No-confidence calls against May put Brexit deal in doubt
  3. Key points of the Brexit deal (if it ever comes into effect)
  4. Romania heaps scorn on 'revolting' EU criticism
  5. US steps in to clean up Cyprus
  6. 'Decisive progress' on Brexit as British cabinet backs deal
  7. Asylum for Macedonia's ex-PM puts Orban on spot
  8. How the 'EU's Bank' fails to raise the bar on accountability

Join EUobserver

Support quality EU news

Join us