"I can guarantee that we won't simply inflate our way out of debt. Part of the savings my family left us three children was destroyed by the inflation in Italy in the late 60s, early 70s"
- ECB President Mario Draghi
Mario Draghi's pledge to do "whatever it takes" to save the single currency is being challenged by German constitutional court. German most powerful central bankers will scrutinize the legality of the ECB's instrument to stabilize the battered shared currency. Bundesbank President Jens Weidman expressed concerns this programme is illegal because there is no limit to Germany's spending liability under the scheme and he suggested it is only an effective tool to provide loans to other nations' governments.
However, the court is not expected to issue any ruling until German elections on September 22nd, and investors are concerned it can restrict Germany's participation in the ECB's crisis measures and could reignite market panic. Last summer Draghi pledged to save the Euro and in September he launched a new radical policy known as outright monetary transactions, meaning the ECB will buy bonds of a Eurozone government at risk of financial collapse. This policy has been seen as the most effective tool deployed during the last three years during which the 17-nation economy was struggling to grow, as it has widely credited with calming down government bond markets in the peripheral Eurozone states during the last year. During the interview Draghi noticed that the ECB has not spent a single Euro on bond purchases, but managed to make savings deposits in the region safer.
© Dukascopy Bank SA