European Central Bank disappoints investors with non-action

Mario Draghi, President of the European Central Bank, ECB addresses the media during the press conference following the meeting of the ECB Governing Council in Frankfurt am Main, Central Germany, on Aug. 2, 2012.

Jeremy Hobson: Stocks are lower around the world this morning after the European Central Bank failed to announce any bold new steps to save the euro. Investors had been hoping that ECB President Mario Draghi would unveil something big to help solve the European debt crisis.

But instead, this is what they got.

Mario Draghi: The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective.

Pretty complicated, I know. But when you cut through the econ-speak, there's not a lot there, as Marketplace's Stephen Beard reports.


Stephen Beard: Mario Draghi may only have himself to blame. Last week in London, he raised expectations. He said that Europe’s central bank would do everything it takes to save the euro. That thrilled some investors. They thought it meant that the ECB would buy huge quantities of Spanish and Itlaian government bonds.

But today Mario Draghi offered only vague commitments. He promised to come up with more measures to support the euro over the coming weeks. Marc Ostwald of Monument Securities says the market sell-off was predictable.

Marc Ostwald: The ECB has not delivered. It may have delivered some fine words but it’s not delivered action. And markets are definitely looking for action now rather than promisies.

Investors had been looking to the central bank for solutions because so far, the politicians have failed. Today Europe’s top central banker said only governments can end the euro crisis.

In London, I’m Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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