As cryptic and arcane as the oracles of old and the European Central Bank (ECB) presidents that came before him, yesterday the Italian Mario Draghi gave off signals that, read between the lines, let us wonder about another interest rate cut and definite intervention in the sovereign debt markets.
Together, both measures could mean the beginning of the end of the ongoing Eurozone crisis, avoid disaster in Spain and Italy and prevent a contagion from attacking the global economy.
During an appearance before the EU parliament in Brussels, Super Mario (Draghi is nicknamed after the lead character of a famous video game starring two cartoon plumbers) emphasized ?the increase to the risks of an economic slowdown.?
He left inflation risks in the background. Markets perked up immediately as the Spanish risk premium dropped after plaguing the Spanish economy for some time. Now, if the ECB does not think that prices could run away, it could very well avoid, temporarily, fighting inflation as their monomaniacal mission and boost economic activity with another cut to interest rates as they did at the beginning of November.
The next date that the ECB could adopt such a measure is just ahead. The meeting of its leadership council is on Thursday, December 8. The second stroke that helped investors was similarly ambiguous and open to interpretation. Draghi affirmed that additional measures to guarantee the health of public accounts and reign in spending and deficits are ?definitely the most important element for starting to restore credibility.?
