Dimitris Rapidis

The plan of the Director of the European Central Bank Mario Draghi for the haulting of spread speculations concerning the overdebted states of the South Europe (i.e. Greece, Italy, Spain, Portugal) has stirred up discussion, with Bundesbank leading the “opposition” front against him.

The plan of Draghi involving the repurchase of government bonds from countries fueled with public debt by the European Central Bank (ECB) has split Eurozone into three camps. In the one side there are the so-called “hawkish” states that have being turned against any intervention from the ECD, namely Germany, Finland, the Netherlands, Slovakia and Estonia.

On the other side, there are the so-called “pigeon” states that are supporting Draghi’s plan, namely Italy, Spain, Greece, Portugal, Malta, and Cyprus. Finally, in the mediating roles Angela Merkel and François Hollande are endeavoring to reach a compromise that will poise ECB’s intervention in the bond market through the implementation of harsher austerity measures.

In the haswkish camp the most rigorous exponent of financial discipline is Jens Weidmann, the President of Bundesbank who explicitly opposes to any kind of help over member-states that are not abiding by their commitments for public finance discipline. Weidmann additionally stresses out that ECB should only intervene as a mediator and never for providing any sort of financing. He is openly backed by the German Christian-Democrats and the Liberals, whereas he is mainly endorsed by Finland and Slovakia.

The pigeon camp has the majority of seats in the Council of the ECB and want to create a shield against spread speculation. Along with the states we mentioned before, this camp seems to have -even indirectly- the support of US President Barack Obama, who is extremely anxious about the outcome of the global financial crisis (i.e. especially now that the US elections are underway), the International Monetary Fund, that lately has encouraged the European leaders to relax austerity politics, and finally the Central Bank of the United States, commonly known as Fed. It is equally important to underline the support of China which is fundamentally precarious with what is going on in Eurozone as its interests are directly targeted.

The third camp, the mediating group of Merkel – Hollande is working as a bridge to find a viable compromise. They both support Draghi in the issue of shielding Eurozone from speculation while being for the implementation of harder measures in the countries that are supposedly going to benefit from the ECB plan. Nonetheless, Merkel and Hollande seem willing to change the rules of the game by loosening austerity politics in the place of blocking any banking permission to the ECB to use funds from the European Stabilization Mechanism (ESM).

Whatever is the final outcome of these “power games” inside Eurozone, there are two key dates that might possibly define future actions: the first is the critical meeting of ECB in the 6th of September where rumours say that Draghi might endeavor to convince with his plan. The second is the meeting of the next Eurogroup which will take place just after the troika releasing its results upon the process of the Greek economy, probably in mid-September.

In any case, there is one conclusion derived from the Draghi plan: that while this crisis seems that much pervasive and enduring, the institutional bodies of the EU, with recent example the ECB, will not easily admit defeat and will use every possible manner to save Eurozone from collapse.

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  1. the people – special from pigeon countris only have the “hawkish” dirgents to protect them from the uncontroled deficit of irresponsable leaders.
    Is intersting follow the war between Rajoy(Madrid) and most of autonomous counties or Lisbon and most of the mayors. They claim are autonomous (but only to spend not to pay)

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