The headlines were taken by the announcement the ECB will purchase short-term bonds from eurozone countries in what has been called ‘outright monetary transactions’ (OMT) that will run alongside the European Financial Stability Fund.
Draghi is attempting to lay to rest “unfounded fears” and wants this action “to be perceived as a fully effective backstop”.
Any bailout is still predicated on the country applying to the ECB for funds before the central bank pushes the button to buy the bonds. Spain and Italy, for example, have given no indication that they will do so.
A bond purchase will come with strict measures already faced by those countries that have already been bailed out including external – possibly including the IMF – oversight of their domestic economies.
Draghi called the euro itself as "irreversible" and, in a speech in Potsdam yesterday, described a new architecture for the EMU as “the only way forward” with the single currency at the centre of the structure.
“Member States,” he said, “will have to pool more sovereignty in selected policy areas. This is a clear lesson of the crisis. But we will not need to cede all powers to Brussels. Sovereignty will only be pooled where it is essential to ensure a stable and prosperous monetary union. This will be accompanied by broad democratic participation and legitimation.”
H e went on to outline the four pillars of his vision as fiscal, financial, economic and political union with his emphasis on the last one as “essential for engaging euro area citizens more deeply and making the other three pillars legitimate”.
