Under pressure to slash the borrowing costs of the eurozone’s weakest member states, ECB chief Mario Draghi is due to unveil his latest bond-buying plan on Thursday. Already this week France and Italy have called for the bank to do more to stabilise the bloc’s debt.
Daniel Gros, the Director of the Centre for European Policy Studies, believes the strategy could work, but only if governments start doing their bit to bring down deficits.
“We have already seen the impact on the markets because everybody has seen that the ECB cannot pull back. Things have calmed down. The ECB is saying: ‘We are buying the bonds only if the countries do their duty’. If they do it, then the crisis should become manageable; not over immediately, but it should slowly go down,” Gros told euronews.
Despite promising to do whatever it takes to save the euro, Draghi continues to face stiff resistance in some quarters, particularly Germany.
The Bundesbank and some on the ECB’s governing council, seem determined to limit the scope of the bond buying.
“There are, of course, certain parts of the German public, the Bundesbank, some parts of the financial press who are against it. The Bundesbank has always been extremely conservative. They fear that this will lead to more inflation,” Gros said.
That opposition is likely to mean any plan may have tough conditions attached to keep the pressure on eurozone governments to maintain fiscal discipline.
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