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Frankfurt, Germany - European Central Bank President Mario Draghi gets another chance today to spell out how the bank intends to rescue the 17 countries that use the euro from financial disaster.
Expectations have been high since late July when the ECB head vowed to do "whatever it takes" to hold the eurozone together. The following week, on Aug. 2, Draghi announced the broad outlines of a plan to buy short-term government bonds to help out eurozone countries struggling to manage their debt.
Until then, countries such as Spain and Italy had seen their borrowing costs - reflected in the interest rates on bonds they sell - rise to unmanageable levels. Investors were worried the two countries could soon get to a point where they couldn't afford to handle their finances and be pushed into asking for a bailout.
That has already happened three times in the eurozone - with Greece, Ireland and Portugal. The worry is that Spain and Italy are too big to bail out. If those countries fail to pay their debts on time, it could spark a financial crisis that could see the eurozone break up, spreading turmoil throughout the global economy.
Analysts say Draghi's comments today could be constrained by the fact that the ECB may not have worked out every detail of its plans. The ECB chief has to strike a delicate balance: promise and reveal enough to keep markets happy, while making clear that further aid only will come if Europe's politicians agree to do more.
Here is a look at what Draghi and the ECB have been working on and what to look out for today:
Bond-buying strategies: By buying bonds on the open market - Draghi has said the ECB will target short-term bonds with maturities of up to three years - the bank can drive up the prices for a country's bonds. That brings down their interest rate, or yield, and makes it less expensive for countries to borrow money. The ECB theoretically has no limit on the money it can use for its bond-buying plan. As a central bank, it can "print money" to pay for the bonds by simply adding to banks' reserve accounts.
How much it spends on bonds sends a message to the markets. Too much and it could be criticized for violating its treaty provision that forbids it from financing governments directly. Too little and investors think that ECB is only half-heartedly attempting to solve the eurozone's problems. A previous bond-buying program started in May 2010 piled up over $264.16 billion but was too limited to decisively lower yields.
Sticking with short-dated bonds is more in line with central bank's interest rate policy, which mainly affects short-term rates, and so less open to criticism that the plan violates its treaty. It also makes the purchases less risky, as the bonds will be paid back more quickly.
Analysts think the ECB will avoid setting a firm interest rate ceiling at which point it would and step in and buy a country's bonds once the yield hits a certain point. Such a tactic would send a clear signal to markets but would also tie the bank's hands, forcing it to defend that red line or lose credibility.
Potential pitfalls: Draghi has to tread a fine line - not only does he have to keep the markets from panicking and pushing bond yields even higher, but he also has to play a political game. First he has to make sure that the ECB's 23-member governing council is on his side. The bond plan still needs to be passed by at the bank's policy-setting meeting, with a majority vote required but a broad consensus preferred in practice. One voice critical of the bond plan belongs to Germany's central Bundesbank, an influential member of the council because of the size of Germany's financial commitment to the eurozone. Its head, Jens Weidmann, has warned that governments could become addicted to the help and avoid making unpopular spending cuts and tax increases to get their debts under control.
Draghi will also have to keep governments in line if the bond-buying program is to succeed. When he announced his plan last month, Draghi stressed that governments who want help must agree to certain conditions including approaching Europe's emergency bailout fund for assistance and sticking to stiff deficit rules. But once the ECB has stepped in, will countries stick to their commitments after the pressure has been taken off their finances? The history of the eurozone crisis is littered with broken promises and missed targets.