Markets and euro slide after European Central Bank fails to deliver on grand promises to prop up single currency

Financial markets have slumped after the European Central Bank's latest attempt to stave off the collapse of the euro fell flat.

Boss Mario Draghi announced the bank was drawing up plans to buy the government bonds of member states, which would help to drive down the borrowing costs of weaker countries like Spain and Italy.

But his statement was vague on details of how to achieve this in the face of staunch German opposition.

Mario Draghi: Boss of the European Central Bank is under pressure to take convincing steps to help struggling Spain and Italy

Mario Draghi: Boss of the European Central Bank is under pressure to take convincing steps to help struggling Spain and Italy

Draghi kept eurozone rates on hold at 0.75 per cent and insisted the euro was 'irreversible', but stock markets tumbled and the single currency took another battering after his much-anticipated comments.

The FTSE gave up tentative gains and slid 43.7 points to 5,669.1 in early afternoon trading. The Dow Jones opened down 85.4 points at 12,885.7, while Germany's DAX dived 112.6 points to 6,641.8 and France's CAC 40 dropped 56.1 points to 3,265.4.

The euro racked up fresh losses, trading at 79p (€1.273) against the pound and $1.22 against the U.S. dollar.

The interest rates of Spain and Italy also spiralled upwards, despite Draghi's assurances that the ECB was looking into making direct bond purchases to stabilise eurozone borrowing costs.

These have spiked as investors demand higher premiums against the risk they could go bust.

Spain's benchmark 10-year rate hit 6.81 per cent and Italy's was at 6.14 per cent today.


Draghi's latest blueprint for combating the European crisis met with widespread disappointment after his fighting talk last week about doing 'whatever it takes' to save the euro.

Craig Erlam of foreign exchange broker Alpari, said Draghi's comments today appeared to go against his statement last week.

'What he said last week was they’ll do whatever it takes, today it was more like they’ll do whatever the Bundesbank allows them to.

'Draghi looked like a man defeated in the press conference, which came shortly after his meeting with Jens Weidmann, head of the [German] Bundesbank. Today’s conference really has shown who is king.'

Ranvir Singh of market analyst RANsquawk said: 'Is the euro irreversible or is the reversibility of the euro unacceptable?

'Draghi suggested both during his press conference and while the former suggests strength, the latter creates uncertainty — and implies doubt.

'Europe remains in a dark place and the options available for rescue are shrinking by the day.'

Ishaq Siddiqi of ETX Capital said: 'Ultimately, today’s meeting indicated that there remains a discord between policymakers on future measures, with Draghi acknowledging the Bundesbank’s opposition to bond buying.

'This really rattled markets as it suggests there will be further delays to a viable solution to push the eurozone out of this mess. Both Italian and Spanish bond yields are on the rise, expressing disappointment with Draghi’s remarks.'

The Bank of England kept interest rates at 0.5 per cent and its quantitative easing programme on hold as expected today.

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