Will the two Marios – Mario Monti, the new technocratic prime minister of Italy, and Mario Draghi, the still quite new president of the European Central Bank – save the eurozone? No. But individuals can make a difference. These men bring sophisticated pragmatism to the table. Without that, this flawed structure will not survive. Policymakers must be both more co-operative and more flexible. The economic and political costs of a breakdown would be so large that one has to hope for better. Maybe the two Marios will shift policy in a more productive direction.
Two straws float in the wind.
The first is the new long-term refinancing operation, announced by the ECB last month. With banks under fierce funding pressures, the offer of three-year money at the average of the ECB’s benchmark rate (today 1 per cent), without stigma, was one the eurozone’s banks could not refuse. Initial take-up was €489bn for 523 banks. The balance sheet of the ECB is about to explode. This was a bold and cunning move by Mr Draghi and probably the most he could get away with right now.