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ECB will save the euro
Aug 06, 2012
The European Central Bank is ready to do “whatever it takes” to support the euro, according to ECB president. Mario Draghi’s strong message of support prompted a rally in European share markets and the euro.
In Spain, the Ibex share index closed up 6 percent, while in Italy, the main share index closed up 5.6 percent. The comments also triggered a fall in bond yields. Spain’s 10-year yield, which had hit a record high of 7.6 percent earlier, fell back to 6.8 percent.
Mr Draghi’s comments also boosted the euro, which had been languishing at two-year lows against the dollar. In other stock markets, the UK’s FTSE 100 ended up 1.4 percent, France’s Cac 40 jumped 4.1 percent and Germany’s Dax climbed 2.8 percent. Speaking at a conference in London marking the start of the Olympics, Mr Draghi said: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” Many, investors took that to be a strong hint that the ECB might re-start its Securities Markets Programme (SMP).
The euro crisis has spread its negative effects even further, with the credit ratings agency Moody’s downgrading the outlook for Germany’s AAA credit rating to negative, because of the prospect of it having to provide more help to prop up the single currency.