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Swiss press unconvinced by ECB euro policy

ECB President Mario Draghi addresses the press on Thursday Keystone

Will the cautious policy of European Central Bank President Mario Draghi be enough to save the eurozone from breakup or even outright extinction? The Swiss press were less than convinced on Friday.

This content was published on August 3, 2012 - 09:57
swissinfo.ch

Global markets responded negatively to what they saw as Draghi’s refusal on Thursday to deliver bold action – such as a cut in interest rates or immediate plans to buy more European government bonds.

With little support from Germany on these measures, Draghi instead called for existing rescue funds to be used in the place of intervention by the ECB. He said the bank was working on a plan of action to buy more government bonds – which could lower borrowing costs for troubled eurozone states – but that details still had to be worked out.

“The euro is irreversible. It stays … it is pointless to bet against the euro. It is pointless to go short on the euro,” Drgahi told a press conference.

The prestigious Neue Zürcher Zeitung (NZZ) said the moves by the ECB were not a surprise. It compared the technical procedure with that of the International Monetary Fund and central banks to bail out states, or commercial banks, and provide them with enough liquidity.

It also drew a parallel between the policy of the Swiss National Bank (SNB) to shore up the overvalued Swiss franc.

“But that is as far as the comparisons go. While the SNB can justify its intervention  - that the franc would be strongly overvalued because of reasons outside its control – the ECB policy to stand by the euro for political reasons looks more like a high risk gamble,” the paper said.

The NZZ warned that countries like Greece, Spain, Italy and France have not done enough to avoid a debt re-scheduling programme within the eurozone. It said the bank is being overly optimistic.

“The ECB is embarking on a very dangerous mission into unknown waters. It risks running aground with eyes open. High inflation and a massive write-off would be the most likely consequences.”

Geneva-based Le Temps was a bit more forgiving in its commentary. It likened the problems of the eurozone to a roller-coaster and said Draghi must go “step by step” to avoid sudden pitfalls and demonstrate that he is in control of the situation.

“The question for the guardian of the euro is much more complex than it seems and that his statements leave one to believe,” the paper wrote, noting that without the support of all countries, a policy of ECB intervention in bond markets was likely to fail.

“The important thing is not that the markets are disappointed in the short term but that a finalised strategy will be put into place,” Le Temps said, adding that although Draghi “appeared confident”, it seemed he had not done enough to dispel doubts completely.

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