Mario Draghi’s Opiate of the Markets
The “outright monetary transactions” scheme announced by ECB President Mario Draghi last July has served as the proverbial “bazooka” – a gun so powerful that it does not need to be used to deter speculative attacks on the euro. In other words, Draghi’s bazooka has anesthetized markets, impairing their ability to assess risk.
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CHICAGO – From the standpoint of European stability, the Italian elections could not have delivered a worse outcome. Italy’s parliament is divided among three mutually incompatible political forces, with none strong enough to rule alone. Worse, one of these forces, which won 25% of the vote, is an anti-euro populist party, while another, a Euro-skeptic group led by former Prime Minister Silvio Berlusconi, received close to 30% support, giving anti-euro parties a clear majority.