Saving the euro: what’s the plan?

“We will do whatever it takes to save the euro and believe me it will be enough.”

The words of European Central Bank president Mario Draghi last Thursday. Exactly one week on and he’s expected to unveil just what he thinks it does take when the ECB council meets.

A German based newspaper claims to have obtained information that Draghi is planning to use both the ECM and the European Stability Mechanism to purchase sovereign debt from Spain and Italy.

But the president of Germany’s Bundesbank is strongly opposed to the ECB buying government debt through bonds, and the German finance minister has also dampened enthusiasm for that that idea.

The overriding fear is that Spain could need a full bailout, dwarfing those of Greece, Ireland and Portugal. Spain however is continuing to deny it needs such help.

Markets, including Spain’s IBEX, were briefly bouyed by Draghi’s comments last week but have since regained their nervousness. They will be watching anxiously to see what comes out of Thursday’s meeting.

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