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European Central Bank acts to 'save the Euro'

Mario Draghi has said he will do 'whatever it takes to preserve the euro' Photo: Reuters

Jam tomorrow.

The Bank of England and the European Central Bank have both held back from any direct action to boost flagging economies. Both decided to hold interest rates at their current record low levels. But many economists expect the Bank of England to step up Quantitative Easing in months to come and the ECB signaled it may step in even sooner with measures to ease the pressure which has been building on some of the weaker economies of the eurozone.

It's the ECB which is worth a closer look today. Mario Draghi, President of the ECB, raised expectations last week when he said he would do

whatever it takes to preserve the euro. And believe me it will be enough.

That set investors' imaginations racing - did he mean finally unleashing some big financial bazookas to convince the markets he meant what he said? The yields, interest rates, on Spanish and Italian government bonds ebbed back from dangerous levels in response to Mr Draghi's speech and attention turned to today's press conference.

As it got underway, it was clear that the ECB was still some way off being able to unveil anything concrete.

Mr Draghi wants to buy bonds from struggling countries (which would have the effect of driving the yields down). Critically, he insists this could only be started once those countries agree to onerous conditions. This would go some way to allaying German concerns of a bailout taking off the pressure for those countries to reform but it would involve a loss of sovereignty which Spain, for example, would find difficult to accept.

One more thing: the ECB is considering relinquishing its demand always to be the first to be repaid by governments whose bonds it buys, something which had put off private investors whose own claims as creditors had been pushed further down the line.

It seems Mr Draghi hasn't yet won over the Germans to support his plan.

He may yet deliver but investors are disappointed and those bond yields have risen and share markets have fallen sharply. Don't write off the ECB yet, it has the firepower and Mario Draghi has a determined air about him.