After years of hesitation punctuated by panic, Europe has finally accepted the compelling logic that a single currency needs a lender of last resort. Pro-euro voters in the Netherlands have clearly been impressed as the President of the European Central Bank (ECB), Mario Draghi, braved the scowl of the ever-cautious Bundesbankand led his ECB directors to a pledge of unlimited – if conditional – short-dated bond-buying to avert another currency crisis.
The ECB acted in the nick of time; the fuse was set for an explosion next month with the market chaos of both a Greek and Spanish crisis. President Obama has been spared a Eurozone spanner in his campaign for re-election and the chances are we won’t have a pre-November Greek euro exit or Spanish bankruptcy, plus a run on Italy and a French financial crisis just for good measure.
Indeed, now that the ECB is ready to intervene to level short-term bond rates for economies intent on reform and the German Constitutional Court has removed its objections to a bailout fund, there need be no European bust-up over who pays for it.