Draghi says ECB will buy debt

Impatience was mounting as people were putting more and more pressure on the European Central Bank (ECB), including English-speaking media sources that were starting to criticize the governor of the ECB, Mario Draghi, for talking lots and doing little.

Draghi said, "there is unanimous approval to use unconventional measures if the situation requires them." As before, his words spurred euphoria in the markets. The Ibex broke resistance and its next barrier is 11,000 points. No measures were adopted, but Draghi made it crystal clear that he is prepared to do something, and for the first time ever he mentioned the possibility of buying sovereign debt similar to quantitative easing (known as QA) in the United States even though this strategy is terra incognita for the ECB. Some people are worried, because deflation is cropping up in Europe and threatening to undermine the fragile growth that it has seen in recent months. Critically, the peripheral countries still have high levels of debt, which will only get worse if prices drop. These countries have wanted the ECB to take action for a long time. In an unexpected but fortunate shift, Germany finally agrees. The Bundesbank has given the okay to pumping money into the EU, because German exports would suffer if the euro loses value when deflation strikes economies in the region. The ECB's greatest fear is that prices will remain flat for a long period of time due to structural problems with the region's economies.

Draghi continues to prove that what he says carries weight and that the markets think he will take action soon. But this time, he really does need to do something. Pumping new money into the European economy would help fund growth in the euro zone, which is the only way to block deflation in the near term and flat economic growth in the long term.