Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

02 December 2011

WSJ: A euro crisis deal emerges


European Central Bank President, Mario Draghi, signalled the bank could ramp up its role battling the debt crisis if eurozone governments enforce tougher deficit cutting — suggesting outlines are emerging of a deal that investors have been clamouring to see happen.

In his first appearance before the European Parliament since taking the ECB helm last month, Mr Draghi offered a road map for policy-makers. He called on eurozone governments to craft quickly a "new fiscal compact", calling it "the most important element to start restoring credibility". He added that "other elements might follow, but the sequencing matters".

ECB watchers interpreted his remarks as a possible quid pro quo, suggesting the bank could expand its intervention once governments agree to strengthen the eurozone's budget rules. Within hours of Mr Draghi's comments, French President Nicolas Sarkozy warned fellow eurozone leaders that they need to accept what they have long resisted—a tighter union bound by enforceable fiscal rules and the alignment of economic policies—or see dire consequences. The ECB has so far resisted the pressure, keeping purchases in the €5 billion to €10 billion ($6.7 billion to $13.4 billion) range each week. That has been enough to keep the borrowing costs of Italy and others from spiralling out of control, but is short of the amounts needed to bring them down to sustainable levels. Bond yields in country after country, not only the debt-plagued nations on Europe's southern periphery, have been hitting highs in what has become a new, broader battleground for the currency bloc's survival.

Mr Draghi stopped short of promising unlimited purchases of eurozone bonds, as a number of European policy-makers have recently demanded, but his comments nevertheless raised the prospect that the ECB is willing to do significantly more.

Full article



© Wall Street Journal


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment