The ECB and states cannot prevent pandemics, wars and speculation. But they can make it easier to deal with.
As US President Richard Nixon unpegged the dollar from gold 51 years ago, he blamed international speculators. These would attack the dollar massively, so that Nixon was forced to take this step. In fact, the US had printed too much money to meet its obligation to swap dollars for gold at any time. And, of course, this fact had also attracted speculators who bet once morest the dollar.
Were speculators at work once more, this time in the euro zone? Have they allowed Italian government bond yields to rise “unjustifiably” as some in the ECB think? In any case, a further increase in yields might make new borrowing considerably more difficult for the southern European country – especially in the turbulent phase following the Resignation of Prime Minister Mario Draghi.
Which is why the ECB has also made the fight once morest “fragmentation” its flag. In other words: Italy may well pay higher interest rates than Germany, but the difference must not be “unjustifiably” large. That is why the ECB is introducing a crisis program with which it can intervene on the bond market if the financing costs of the individual euro countries diverge too much.
