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It is safe to say billions of dollars in market valuation were at stake when European Central Bank President Mario Draghi addressed reporters Thursday. A week earlier in a speech, Draghi had offered the following consolation to investors around the globe, a phase repeated so often by now it is probably on the bank's welcome mat. The bank, he said, would do "whatever it takes to preserve the euro."
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It was described here as baroque and Bob Dylan-esque, with a kind of formal, but folksy tinge to it.
Investors reacted. For better or worse, other options have either fallen by the wayside or appear dysfunctional, such as European leaders reacting in time to get anything accomplished.
The debate over whether or not the ECB should buy sovereign bonds or not has been batted around in policy meetings, stirring up more than a few headlines along the way. In its most recent ploy, the ECB was attributed with keeping Spanish and Italian bonds at tolerable levels while loaning European banks cheap money, so they could gobble up government debt. "Nobody but the ECB has enough firepower and agility to react to the European financial crisis," surmised hundreds of newspaper columns and more than a few expert opinions in recent months.
"Whatever it takes to preserve the euro," got worldwide press and sent stock exchanges higher on three continents. The Monday prior, Europe's financial crisis was once again headline news with yields of Spanish debt briefly topping 7.5 percent and the word "unsustainable" ringing in the rafters yet again.
An auditing team was on its way to Athens to assess whether Greece would be eligible to receive the next tranche from its critical international bailout program. Investor jitters were pandemic.
After Draghi's remarks a week ago Thursday, the Dow Jones industrial average in New York added 211.88 points, the Standard & Poor's 500 index added 22.13 points and the Nasdaq composite index gained 39.01 points.
The rally continued Friday and it had caught on. Markets in Asia and Europe reacted positively, as well.
It is safe to say anticipation of ECB action was palatable. Draghi answered the call after the bank's monetary policy meeting Thursday by saying the bank would insist that European leaders take the first step, explaining that it would be a ECB requirement that countries first apply for international help before the bank would lift a finger.
That step, however, would add to the debt burden of whichever country was already in trouble and force upon it draconian spending cuts. Leaders of Spain and Italy, the two most fragile economic hot spots of late, both said they were not going to apply for aid. Italian Prime Minister Mario Monti said such a move would be "premature."
Back to square one.
For all intents and purposes, Draghi on Thursday sounded like a man who had just been berated by his boss. "You go out in front of that microphone and tell those nice people you take back what you said last week," the ECB Governing Council may have instructed Draghi.
It turns out, "Whatever it takes to preserve the euro," was a slight misstatement. "Whatever it takes for you to preserve the euro," was what Draghi should have said.
In international markets Friday, the Nikkei 225 index in Japan shed 1.13 percent, while the Shanghai composite index in China rose 1.02 percent. The Hang Seng index in Hong Kong gave up 0.12 percent, while the Sensex in India lost 0.15 percent.
The S&P/ASX 200 in Australia shed 1.12 percent.
In midday trading in Europe, the FTSE 100 index in Britain gained 1.48 percent, while the DAX 30 in Germany climbed 2.3 percent. The CAC 40 in France added 2.63 percent, while the Stoxx Europe 600 jumped 1.57 percent.
