Europe's Bernanke, ECB chief Mario Draghi triggered a relief rally across the world today as he asserted his central bank would go to any length to lower the interest rate on Spanish bonds and that of other debt laden countries like Ireland where interest rates are an unaffordable 6-7+%. Problem is his bank doesn't have the full faith and credit of any nation credible enough to back that promise.
The Eurozone was built by politicians to deliver the candy but not pay the piper. The ECB would need the full backing of Germany for starters to print the money, deliver the promise and have anyone believe it. Rather the ECB's rescue is on a budget and pretty much its allocation is already spoken for.
Who is reporting that Germany's own constitution requires a monetary dicipline that protects the value of the currency? The ECB putting Germany on the hook for 1 Trillion Euros or more would be a violation of the German peoples' rights to a stable currency as mandated by their constitution. Legally, the ECB has very limited authority to do what must be done to keep bankrupt sovereign countries afloat. Spain's problems are way beyond the ECB's resources.
So the relief rally will peter out. Everyone is on summer vacation and Draghi doesn't have a printing press. The ECB can't issue bonds either. Who would ever promise to repay them?
August is Greece and maybe Spain's time of peril and coming to the truth. If you can't pay your debts, bankruptcy is the best option.
As for the protection of the German people's currency and personal savings? The Eurozone Rescue Project and their own leaders have already put them on the hook for maybe as much as 1 Trillion Euros they are unaware of. Will they find this out when they get home from summer vacation?
Deny, minimize, accept, Central Bank, repeat.....................
