Angela Merkel has unambiguously suggested that “If the Euro fails, Europe fails” leaving no doubt in anyone’s mind, the importance of the EU and the critical danger that the Eurozone is currently in. Previous interviews from the Governor of the Bank of England, Mervyn King, may at the time have seemed incongruously grave when he emphasised how serious the current liquidity crisis was, though given the past couple of weeks’ events, he is likely feeling vindicated.
Mario Draghi, despite bold intentions announced in his first ECB meeting to cut interest rates to 1.25%, has still moved to confirm that he does not intend the ECB to act as a lender of last resort, and that pursuit of price stability is still the overwhelming aim of the ECB. Admittedly, it was always going to be difficult despite the prestigious position of President of the ECB to transform market confidence, but something may need to be done to make a seemingly “imminent” bailout of the Italian Economy to perhaps being only “unsurprising.” An IMF spokesperson has already had to quickly refute rumours that a €600 billion package had been agreed.
With Silvio Burlesconi’s recent agreement to step down amidst market pressures, bringing the tally of Governments toppled during the Euro liquidity crisis now up to an impressive 6, Mario Monti has put together a technocratic Government which will hope to improve the structure and sustainability of Government debt and bring the Economy into more favourable conditions.