On July 26th, 2012 Mario Draghi said the following words at the Global Investment Conference in London: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” (“As part of our mandate, the ECB is ready to do whatever is necessary to preserve the euro. And believe me, it will be enough.”
That was the turning point in the euro debt crisis. The common currency was on the brink. The then German Finance Minister Wolfgang Schäuble spoke openly of the Greeks leaving the monetary union (“Grexit”).
“They were magic words”
Draghi’s speech struck the financial markets like lightning. The previously higher interest rates for crisis country bonds fell sharply, the euro stabilized and stock market prices rose. They were “magic words,” said Holger Schmieding from the Berenberg Bank. Draghi defended the euro “against an irrational market panic”.
Since then, the players in the financial markets have known about the power of the ECB. Draghi’s successor, Christine Lagarde, has also shown this in the ongoing corona pandemic. If need be, the central bank can calm the financial markets – with unimaginable sums of fresh money.
Source: Nachrichten
