Draghi Signals ECB May Step Up Debt Measures If EU Considers Fiscal Union

ECB president Mario Draghi signalled the ECB could do more to fight the debt crisis as long as governments push the euro area toward a fiscal union. “A new fiscal compact” is “definitely the most important element to start restoring credibility,” Draghi said in an address to the European Parliament in Brussels today. “Other elements might follow, but the sequencing matters. It is first and foremost important to get a commonly shared fiscal compact right.” Draghi didn’t specify what more the ECB could do and said the central bank’s bond purchases “can only be limited.” Still, he “appeared implicitly to hold up the offer of a significantly higher pace of debt purchases” and “potentially other measures, provided that euro-area governments were to commit to a new fiscal pact,” said Julian Callow. The ECB yesterday joined forces with the Federal Reserve to cut the cost of emergency dollar loans to banks outside the U.S. While the coordinated action fuelled a global stock market rally, the yield on Italy’s 10-year bond is still close to 7 percent as contagion spreads to the euro region’s core.