The head of the European Central Bank has pledged to ensure that the euro’s future.
Mario Draghi’s signalled was that the ECB will take on the financial markets over high Spanish and Italian borrowing costs.
Draghi called the single European currency “irreversible” adding the “eurozone has the power to defeat market speculation”.
At an investment conference in London he said: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
The speech caused the euro to jump in value while interest rates on Spanish and Italian bonds fell sharply. Madrid and Rome have been asking the ECB for help for months.
The comments are Draghi’s boldest to date. Economists speculated that they are prelude to the ECB finding a way to buy the bonds of the eurozone governments that are under most pressure or supporting them in some other way that ECB rules allow.
The ECB has kept its sovereign bond-buying programme mothballed for months. Internal opposition to reviving it is stiff so focus will now be on what else the ECB could do.
On Wednesday, ECB policymaker Ewald Nowotny broke ranks with his colleagues, saying that giving Europe’s permanent rescue fund a banking licence so that it could drawn on central bank funds had merits. Draghi and others have previously rejected that option.
Alternatively, the bank could act as the Federal Reserve and Bank of England have, and opt for straight quantitative easing — that is printing more money, even though that tends to increase inflation.