European Central Bank President Mario Draghi has gone on the offensive as he seeks a game changer in the battle against the sovereign debt crisis.
Draghi, who sparked a global market rally last week by pledging to do whatever it takes to preserve the euro, is trying to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before ECB policy makers convene on Aug. 2. He meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today and is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.
“We have reached a decisive point,” Jean-Claude Juncker, who heads the group of euro-area finance ministers, told Germany’s Sueddeutsche Zeitung in an interview. “The world is talking about whether there will still be a euro zone in the next few months. We have to make abundantly clear with all available resources that we’re completely determined to guarantee the financial stability of the currency.”
An EU summit agreement at the end of June to allow the bloc’s bailout funds to directly recapitalize banks sparked initial relief that leaders may manage to sever the link between ailing lenders and governments. Markets have since tumbled as it became clear that it could take many months for a key plank in the scheme, a euro-wide banking supervisor, to be set up.