Op-ed: Is Draghi ready to deal with Greece?

Mario Draghi is worried again about finding credit sources. Specifically, he cited Spain as an example of a country experiencing serious credit shortages, a view that the Spanish Mortgage Association (Asociación Hipotecaria Española in Spanish) confirmed after reporting a 6% drop in real estate sales in December.

This figure means that the drop in new credit is still greater at 30%. Surely a needed deleveraging process is underway in the Spanish economy after years of excess debt, but financing for new projects is also lacking. Increased financing would re-energize business in the country.

Intending to increase available funds, the European Central Bank announced that it would lower the size of the guarantees it requires in order to grant loans. Still, for as much liquidity as they are trying to provide, they are running into some trickery at a bank that continues to be busier with its cleanups than granting loans. All the money that the bank can find will be used to buy public debt, which will take money out of the private sector.

Even though Draghi can be congratulated because the European economy is showing some signs of stabilizing, the chances that it will derail are still high. Such problems are increasing tensions. Yesterday, Greek political parties said that they reached an agreement that was received with doubts across Europe.

Most experts have already given up on Greece, because even after a default it will not be able to increase growth and pay back what it owes. The issue is when the country should be allowed to fail and how to reduce the impact of this inevitable event. The European Central Bank (ECB) will have to skirt orthodox methods in order to save Portugal.