Markets rally on ECB chief's bold gamble but few believe it will save the euro in the long term
Mario Draghi's effort to create a financial backstop for troubled eurozone countries should reduce the risk of a union break-up, says the Financial Times.
The unlimited size of the lending programme, coupled with assurances that the European Central Bank will drop any claim to debt seniority and that purchases will be subject to "strict and effective conditionality," is still an "audacious gamble", says the paper.
But while the ECB leader's proposals may remove investor pressure on troubled countries, they also effectively spread responsibility for repaying national debts to the eurozone countries as a group.
The New York Times says the Draghi decision "propels political leaders farther down the uncertain and winding road toward a Europe with centralised control over government spending and economic policy, instead of a collection of nation states that sometimes seem to share little more than a currency and a slumping regional economy".
The paper warned of the risk that monetary policy is moving faster than political leaders are able to create the institutions needed to ensure the survival of the euro. Jacob Kirkegaard of the Peterson Institute for International Economics in Washington says the Draghi plan begins to answer the question, "How do we bail out these countries in a way that is sustainable as well as politically possible?"
Markets around the world rallied on Draghi's proposals, reported the Daily Telegraph. Eurozone stock markets rose to a six-month high, led by Spain's Ibex, which soared 4.9%, and Italy's MIB, which closed up 4.3%.
The French CAC rose 3%; Germany's Dax ended up 2.9%, while in London the FTSE climbed 2.1%. US markets followed suit, with the S&P 500 closing at its highest since January 2008 and Nasdaq ending the session at its highest since December 2000.
But the good news may not last long. "The Draghi blueprint will not be enough to save the euro," says the Guardian. "[Draghi] has bought Europe a bit more time. The can has been kicked a few metres down the road. He has done so by incurring the wrath of the Bundesbank and will know that if this fails, there is little more the ECB can do."