Investors may not have liked what European Central Bank head Mario Draghi had to say on Thursday, but it was the clearest indication yet that a plan is finally taking shape to reduce borrowing costs for Spain and Italy. Germany remains wary, though, and commentators say the outcome could be disastrous.
The markets were disappointed. European Central Bank head Mario Draghi’s press conference on Thursday sent stock indexes around the world plummeting, as investors had been hoping the bank would immediately resume buying up sovereign bonds from crisis-stricken euro-zone countries. Even worse, Spain’s borrowing costs on 10-year bonds rocketed above the critical 7 percent mark — a product of Draghi’s press-conference pledge that the ECB would only step in if a country applies for a euro-zone bailout.
Many politicians in Germany, however, were ecstatic. Leaders from most of the country’s major parties welcomed Draghi’s inaction, including lawmakers from parties in Chancellor Angela Merkel’s governing coalition.
“I completely agree with ECB President Mario Draghi that decisive consolidation and reform policies at the national level should be the absolute top priority and are indispensable,” said Economy Minister Phillip Rösler. The leader of Merkel’s junior coalition partner, the Free Democratic Party (FDP), Rösler is also deputy chancellor. He added that monetary policy cannot replace national efforts and “does not offer a lasting solution to the crisis.”