Mario Draghi sees reason to be "optimistic" about the euro area financial crisis now that he's committed the European Central Bank's balance sheet to ending it.
Time has been bought by ECB President Draghi’s pledge to purchase government securities and the imminent birth of Europe’s €500 billion bailout fund, the European Stability Mechanism. To persuade global investors that the euro area can make it through its second decade intact, French socialists, German burghers, Catalan separatists, Italian technocrats and Greek tax collectors have to forge a rainbow alliance to meet the conditions demanded by markets, creditors and the ECB.
Following an unproductive meeting of European finance chiefs in Cyprus last week, a market rally triggered by Draghi’s debt-buying plan has run out of steam. Spanish and Italian bonds have surrendered some of their recent gains.
Europe’s powers are, for now, enjoying a moment of calm after the ECB revived bond buying, Germany’s constitutional court blessed the ESM, an election in the Netherlands passed without an anti-euro spasm, and Greece’s prospects for help stayed intact despite budget backsliding.
“Europe is stabilised”, Austrian Finance Minister Maria Fekter says. French Finance Minister Pierre Moscovici sees “light at the end of the tunnel”.
The lesson of the turmoil is nevertheless that pride has always come before a fall. Leaders declared a turning point six months ago before hitting reverse as Spain’s banks wobbled and support for Greek anti-bailout parties forced two elections there in a six-week span. In 2011, officials cheered the results of a July summit and headed on vacation only to find their pact in pieces before they returned.
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