LONDON – When Mario Draghi, the president of the European Central Bank, publicly proclaimed that the ECB would do “whatever it takes” to ensure the future stability of the euro, the effect of his remarks was immediate and remarkable. Borrowing costs fell dramatically for the governments of Italy and Spain; stock markets rallied; and the recent decline in the external value of the euro was suddenly checked.
It remains unclear how long-lasting the effects of Draghi’s intervention – or of the public support offered to him by German Chancellor Angela Merkel, French President François Hollande, and Italian premier Mario Monti – will prove to be. What we can say with certainty is that Draghi’s remarks and the reaction they evoked demonstrate that the fundamental problems of the eurozone are not primarily financial or economic; they are political, psychological, and institutional.
International observers took such notice of Draghi’s commitment to do “whatever it takes” to save the euro because so many of them have come to doubt other leading European players’ commitment to do likewise. (Some of these doubts are, of course, politically or financially self-serving; a certain model of financial capitalism perceives the euro as a threat, and its adherents will do everything they can to bring about its demise.)
But eurozone leaders’ inability to assuage doubt about their commitment to the euro after two and a half years of crisis suggests that the problem is deeply rooted. In their own defense, eurozone ministers point to the raft of reforms that they have introduced over the past 30 months, which will promote economic modernization, the restoration of sound government finances, and closer economic coordination.