The euro crisis: Discouraging news

Posted: November 8, 2012 in economy
Tags: , ,

MARIO DRAGHI, the head of the European Central Bank (ECB), appears to be winning his bluff with the markets since he declared that he would do “whatever it takes” to save the euro. Bond yields in Spain and Italy have fallen significantly since the beginning of September, although borrowing costs in Spain are higher than they were at the beginning of the year. Unfortunately for the peoples of the euro zone, it is becoming increasingly clear that “whatever it takes” is not actually being considered. Two recent stories support the pessimistic view.First, consider this article from yesterday’s Financial Times:Addressing a German mutual banking event in Frankfurt, Mr Draghi said: “Financial union does not have to imply the pooling of deposit guarantee schemes, an issue that I know is of concern in this country. Organising and funding deposit guarantee schemes can remain a national responsibility, with comparable effectiveness.” While Mr Draghi’s comments chime with the thinking of officials in Brussels, it was the most explicit acknowledgment yet that plans for a single deposit guarantee scheme, already shelved, may not be revived. Establishing a common backstop for the €5tn of deposits in the eurozone has proved by far the most politically contentious element of Europe’s drive to form a banking union. Since the autumn, member states led by Germany have been gradually scaling …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2012/11/euro-crisis-0?fsrc=rss

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