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Draghi, annotated

What the ECB president was <em>really</em> thinking.

Mario Draghi. Photograph: Getty Images

We don't normally do straight-up linkblogs, but sometime-NS-contributor Paweł Morski's "annotated highlights" from the ECB press conference yesterday are a must-read. Here's a taster:

As regards fiscal policies, euro area countries should build on their efforts to reduce government budget deficits and continue to implement structural reforms, thereby mutually reinforcing fiscal sustainability and economic growth. Fiscal policy strategies need to be complemented by growth-enhancing structural reforms. […] To support employment, wage-setting should become more flexible and better aligned with productivity.

The floggings will continue until morale improves. Our only idea for growth is to give all the German MEPs little “Ask Me About the Hartz IV Labour Reform” badges and hope the word spreads.

So this could also go ahead speedily. I am sure that the European Commission has done a splendid job on both accounts.

You want to know how cool I am? I can say this stuff with a straight face.

Informative and entertaining. It's like an economics version of Where on Earth is Carmen Sandiago?

Anyway, the key takeaway – if you aren't clicking through – is that Mario Draghi has a habit of dropping bombshells where they really shouldn't be. Draghi suggested that the European Commission should draw an explicit distinction between uninsured depositors and bondholders in favour of the depositors – à la America's FDIC – despite the fact that the funding of European banks is far more reliant on bondholders than American banks are. The advantage of such a move would be that it would lessen the risk of a bank run, Cypriot-style; but if it scares off bondholders instead, it could be disastrous.

An important point – buried in the answer to a question at a press release. It's hardly "whatever it takes", Draghi's famous intervention which may have saved the Eurozone for a bit.