Is it enough? Will it work? One thing is certain, interest rates on Portugal’s crippling debt plunged to historic lows today thanks to some epic decision-making by the European Central Bank led by Mario Draghi.
“We think (what we’ve done is) a significant package,” the ECB president announced as he revealed the measures on Thursday. “Are we finished? The answer is no. We aren’t finished here.”
If need be, the ECB may well go in for some quantitative easing (QE) – the jargon that translates into “printing money” – but for now at least, what has been dubbed the “Draghi effect” is hoped to kick-start Europe into economic growth.
As money-men get down to the nitty-gritty of interpretation, countries are either beaming or staying schtum.
France, for example, is delighted. Germany not so.
France is happy because it has long advocated the need for a weaker Euro to kick start the European economy, while Germany is said to favour a strong Euro, as it keeps savers happy.
Thus Angela Merkel is wearing her classic poker face, refusing to comment particularly as the ECB made its announcement without referring to governments.
Meantime, Germany’s finance minister Wolfgang Schäuble said low interest rates were “not a long-term solution”.
Conservative German economist Hans-Werner Sinn went even further, saying the ECB’s moves “smacked of desperation and would not work”.
“This is a desperate attempt to shift capital flows to southern Europe,” he told reporters.
But for now, in Portugal – as political crises rain down from every quarter – the Draghi effect is seen as a welcome ray of sunshine and everyone is hoping for the best.
Draghi also intimated that “for all practical purposes” interest rates had now reached rock bottom.
Asked how long it would take for the ECB measures to work their way through into the economy, he said: “Most likely we will see immediate effects in the money markets and we will see delayed effects in the real economy attributable to this programme … It will probably take three or four quarters.”
