Markets jump as ECB hints at more support for Spain

Tim Wallace
Follow Tim
EUROPEAN markets soared yesterday after European Central Bank boss Mario Draghi promised he would do “whatever it takes” to end the Eurozone crisis – a hint that more government bond purchases could be on the way to ease the pressure on struggling states like Spain.

He told an audience at the Global Investment Conference that the reforms and agreements of the past six months represent more progress “than we could possibly have hoped for” in trying to resolve the situation.

But central bankers from key emerging markets disagreed, arguing that progress in the Eurozone has been too slow, adding to the uncertainty hurting global markets.

And OpenEurope released a report warning that the Eurozone bailout funds may be too small to properly support Spain if the troubled country needs a full-blown aid package.

That could result in leaders kicking the can down the road again with smaller measures designed to hold off the problem for six months or a year until they develop a fuller plan.

Draghi said that he would do whatever he could within the ECB’s mandate to help, and that includes bringing down governments’ high borrowing costs.

“Markets underestimate the political capital that has been put behind the euro,” he said.

“The project is irreversible, and these are not just empty words – they are based on actions that have been taken and will be taken.”

“The ECB is ready to do whatever it takes to preserve the euro.”

Italy’s 10-year borrowing costs fell 0.389 percentage points to 6.056 per cent yesterday, while Spain’s fell 0.448 points to 6.928 per cent.

Shares jumped with the FTSE 100 up 1.36 per cent and Spain’s IBEX up 6.06 per cent. And the euro hit a two-week high against the dollar.

But Brazil’s central bank governor Alexandre Tombini said the “reforms are late and rather too little,” and his Mexican counterpart Agustin Carstens said “implementation must be accelerated,” arguing that greater coordination between Eurozone leaders would give markets more confidence and help global growth.

Meanwhile Greece’s ruling coalition failed to agree the terms of a new €12bn (£9.39bn) round of spending cuts, despite the presence of Troika officials and EC president Barroso.