In a quick and unexpected response to indications that Europe’s sovereign debt crisis is beginning to affect the global economy, European Central Bank (ECB) president Mario Draghi stated that the bank will do whatever is necessary to maintain the euro, even if that means intervention in Spain’s bond market.
This Website Is For Financial Professionals Only
Draghi said any situation that interferes with the monetary policy transmission channel in Europe comes under the ECB’s mandate. He squarely placed Spain’s situation within that mandate. This indicates that the ECB may be willing to renew its bond purchasing program for both Spanish and Italian bonds.
Draghi’s statement bolstered global markets. He stated that markets are overreacting to the situation and that the strength in the euro is greater than generally thought.
Futures on US markets also surged on top of a better than expected employment report. Claims for unemployment fell for the fifth weak in a row and to levels that were lower than expected.
As long as economic indicators in the US continue to strengthen, momentum may gather to push the economy forward. On the global stage, reassurances from the ECB
add temporary confidence but the problem with Europe has always been if and when action will follow rhetoric.