Eurozone's Christmas miracle?
Mario Draghi, president of the European Central Bank, speaks during a press conference (Dec.8, 2011). Credit: AP
Who says there's no Santa Claus?
Not European bankers. The continent's new chief central banker, Mario Draghi, doesn't have a white beard or a red-nosed reindeer, but you can call him St. Nick anyway thanks to the stealth bailout he's concocted to fend off Armageddon in the eurozone.
Draghi's European Central Bank is giving the continent's financial institutions the timely gift of free money for up to three years, which they can turn around and lend to their governments at much higher rates. That in turn seems to be lowering interest rates on European sovereign debt. So the banks are propped up, the governments are pulled back from the precipice, and precious time is purchased for the Europeans to somehow straighten out the situation.
At least we hope so. The risk of an economic collapse in Europe had grown so large that massive central bank intervention looked to be the only way out. Draghi's admirably clever giveaway is exactly such an intervention, only within the legal and political constraints that bar him from bailing out governments directly.
That course might have been preferable, and cheaper for taxpayers. Besides, printing money, as the central bank is doing, is always risky; things could go very wrong in any number of ways. Yet bailing out the banks, and only indirectly the nations, is vastly better than the stern doses of castor oil and counseling that were the only previous palliatives on offer. Europe isn't remotely out of danger, but austerity by itself was never going to save it. Now, at least, the odds have improved that the patient will make it through the night.
