Europe failed again today. It’s hardly news when this happens anymore, but the latest ballyhooed European plan to put the euro crisis behind it has now fallen apart. Markets have realized that yet again they were being sold a hope instead of a plan, and the more ECB president Mario Draghi tried to explain what the ECB was up to in his afternoon press conference, the more the markets fell.The response from European financial markets was immediate and severe. In Spain, the interest rate on 10-year bonds went past 7 percent, while in Italy they climbed above 6 percent. Stock markets in the two countries plummeted as well.Draghi, who last week teased the continent when he said he would do “whatever it takes” to ensure the future of the euro, had led the Financial Times to wonder whether the ECB would break out a “bazooka or a pea-shooter.” Today, it got its answer:
“The ECB has disappointed the market, which expected some action after Draghi’s strong comments last week,” said Marc Chandler, global head of currency strategy.“Draghi tried to deliver a fait accompli to the ECB board, seeming to promise action, which he was not authorised to do. It appears he simply did not have his ducks lined up.”
To nobody’s surprise, the main hurdle appears to be the Germans. “Clearly the ECB and the German staff from Buba [the Bundesbank] are at odds,” said one analyst, once again highlighting the internal divisions that are preventing Europe from deploying the kind of drastic solutions necessary to resolve the crisis.Europe still has no consensus about what to do and no method of forcing a decision. There is literally no sign at this point that Europe is any closer to a solution than it was two years ago.The technical term for situations like this: bad news. There is lots more to come.