03 August, 2012


Mario Draghi, head of the European Central Bank, is in the doghouse. I don't mean with the European Political Class (our picture shows him troughing at the taxpasyers' expense with Mariano Rajoy, Prime Minister of bankrupt Spain), but with the markets.

Draghi announced on Wednesday that 'We will do everything within our mandate to support the euro, and, believe me, it will be enough'. There were little coded references in his speech before the ECB meeting to the effect that they would start buying the bonds of Spain and Italy, to keep interest rates down. So, what would he announce and how would the markets react? Thursday was Draghi Day. He announced nothing. Clearly he was either whistling in the dark or trying to bounce the Germans into shelling out without conditions.

Our Saxon cousins were having none of it. Spain and Italy can, if they wish, apply for assistance from the Financial Stability Fund, but there would be conditions attached. After that they might let Draghi buy some bonds but it wasn't certain.

As of the moment, Spain refuses to apply for a bailout, nervous of what conditions would be applied. Mario Monti of Italy who was boasting that there would be a shield keeping Italian bond rates down, is also disappointed.

The European Bond Markets had their worst day on record. Shares collapsed, Spain and Italy are paying more for their debt.

Thanks Mario

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