ECB President Draghi has insinuated that there is a lot more ammunition to be fired. Draghi was determined to build on his comments in London last week when he pledged to do ‘whatever it takes’ to save the euro. He says that ‘financial fragmentation’ as hindering the monetary transmission mechanism. However, his key point was the ‘risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner.’
In order to create the fundamental conditions for such risk premia to disappear, policy-makers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination. As implementation takes time and financial markets often only adjust once success becomes clearly visible, governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines. Source: BNZ
The graph below shows that the ECB have a bit of cash.