Whatever it takes… maybe

“Whatever it takes” were the words that boosted market confidence and spread optimism throughout world media last week. However, interpretations to yesterday’s remarks couldn’t be more varied. While some media focused on the ECB’s willingness to intervene, others highlighted the financial markets’ disappointment.

While the International Herald Tribune chose a descriptive “Assurances but no action by European Central Bank” as a headline, the Wall Street Journal focused on the possibility of an ECB intervention with “Draghi hints at bond buying.” All the same, during the WSJ’s live coverage of Draghi’s conference, journalists David Cottle and Brian Blackstone offered a more pessimistic angle by stating that “it’s hard to see markets holding their nerve if the big bazooka turns out to be a damp squib.” “With friends like this who needs enemies?” added Cottle.

Spiegel also focused on investors’ disappointment, while FT Alphaville sees this as a delay: “In other words, we’ll see you after the holidays.” The European Voice offered the most drastic headline stating that the ECB “announced” bond-buying plans.

German media’s interpretations vary. “ECB prepares for new bond purchases” reports the German daily FAZ, while the tabloid Bild states that “Draghi continues to let crisis countries shiver.” Its interpretation is that the ECB leaves the door open for the purchases but dampens expectations about imminent action. When Draghi hinted at possible bond purchases, the same outlet exclaimed: “No more German money for bankrupt states, Herr Draghi!”

Greek and Portuguese media have welcomed the ECB’s press conference with optimism. Greek daily Kathimerini reports that the ECB will gear up to buy Italian and Spanish bonds on the open market but would only act after euro zone governments have activated bailout funds to do the same. Furthermore, Kathimerini says that Draghi’s wording suggested he was prepared to outvote German Central Banker Weidmann if necessary.

Portugal’s Diario Economico shares this view, stating that the ECB is preparing a mechanism to buy debt which will relieve pressure on countries in distress. Publico points out that even though the ECB is ready to buy debt, it is up to Spain and Italy to apply for EFSF/ESM support.

Italian, French and Spanish media share disappointment and fear the markets’ negative reactions. 

Mario Monti, in the following conference with Spanish PM Rajoy, warned that “if spreads don’t go down, Italy will experience an anti-euro government”. Il Sole 24 ore  acknowledges that “the hesitancy showed by the ECB’s president does not provide clear answers” and that “markets took the London speech as a bluff.” Similarly, Spanish media focuses on the worrying increase in Italian and Spanish risk premia going through the 7% ceiling. “The high expectations that Draghi generated last week have melted like sugar” reports El Pais.

The statements above suggest there is no homogenous interpretation of Draghi’s words after the ECB’s Governing Council meeting. Who’s to blame? The messenger or the interpreter?

This review does not reflect Bruegel’s position, nor does it include comments by Bruegel authors.