Draghi’s bond-buying plan continues push for reform
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Get used to the letters OMT. They stand for Outright Monetary Transactions, and that’s the name of the European Central Bank’s new plan to save the euro. It’s very similar to what the Federal Reserve has been doing in this country to help the economy — printing money and buying bonds to bring borrowing costs down. But will it be enough to solve Europe’s debt crisis?
“I think the euro will be saved by its member states, not by the European Central Bank,” said Adolfo Laurenti, deputy chief economist with Mesirow Financial. “But the European Central Bank can help.”
Laurenti pointed out that he thinks the plan is on the right path because it will relieve some of the market pressure from the government bond markets in Italy, Spain and Greece; it buys some time for those countries to continue reform; and it maintains discipline among the beneficiaries because it includes conditions to force them to continue reform and austerity.
“I think this is really a critical point” for the beneficiaries, he said. “The real question is: Is this commitment credible? …I think that’s exactly what the markets will be testing over the next few weeks.”
As for here in the U.S., ADP said private employers added 201,000 jobs last month — far more than expected — and the number of people applying for unemployment benefits dropped. Laurenti said the data is consistent with other indicators that are showing improvement in the economy, and that slow growth is happening.
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