Euro crisis: Has the ECB created a big bazooka?
The European Central Bank (ECB) has announced plans for a plan.
It intends to do something soon to resolve, or at least ameliorate, the continuing debt crisis in the eurozone.
How will it do that?
It seems it will, in due course, start buying the already-issued bonds - the glorified IOUs - that countries like Spain and Italy issue in the financial markets to finance government spending.
The big idea is that the cost of issuing new bonds, and borrowing fresh sums, can be returned to something a bit more like normal.
That will happen, in theory, if the ECB buys existing bonds while paying a lower rate of interest than that which is currently being demanded by sceptical professional investors.
Will it work?
Ken Wattret, chief eurozone economist, BNP Paribas.
The market response has been very negative because expectations had been raised by what Mr Draghi said a week ago and the ECB has now under-delivered.
Now we have an interim period and there is an uncertainty about the details of the plan and how soon it will be implemented.
The important thing is the procedure here.
The preferred route for the ECB is that the EFSF (European Financial Stability Facility) and ESM (European Stability Mechanism) to take the lead, and then for countries to request the assistance - that is the logjam.
Seeing is believing and there is a stumbling block. For the plan to succeed, governments have to set the wheels in motion and request the assistance and then negotiate a memorandum of understanding.
In Spain, particularly, the government appears very reluctant to request the help.
The ECB has moved towards a positive outcome but at a pace that is slower than had been hoped.
Nick Parsons, National Australia Bank
This is a revolutionary policy, as far as the ECB is concerned. It means the ECB plans to go into the markets and buy bonds, of two to three-year durations, in very substantial quantities.
These are potentially unlimited and should be big enough to have the desired effect. Mr Draghi is certainly on the right track.
It will not bring an end to the euro crisis, though. That will simply move on to its next phase.
Neil McKinnon, VTB Capital
It is clear Mr Draghi has not been able to secure the support of either the Bundesbank or German policy makers for some of the plans he had in mind to tackle the ongoing debt crisis in the eurozone.
There is a gap between intention and delivery. Mr Draghi is very much on his own and there is a division of opinion within the ECB and among policymakers and without German approval for some of these plans they are unlikely to be delivered. That is a worrying aspect. That is why the markets are disappointed with all of this.
There is nothing to relieve the pressure that Spain is under and of course it does little to relieve the possible scenario that Greece could default or exit monetary union at some stage. The crisis remains unresolved.
Christian Shulz, senior economist, Berenberg bank
Mr Draghi and the ECB have created potentially a very powerful tool to end this wave of the euro zone crisis, to end the market panic.
Its monetary policy is not working in some southern countries because of the high borrowing costs these countries have, so the ECB has to do something about it.
Will it work? The saying goes that you should never bet against the central bank, it has potentially unlimited pockets and it says it will use adequate amounts, which could be anything up to unlimited.
If it actually deploys this weapon, this big bazooka it has created, the markets are unlikely to speculate against it.
The one problem is that countries might lose the incentive to reform themselves. So it seems the ECB will wait for its rescue umbrella to certify that reform progress is taking place.
Then the ECB will deploy its bazooka. Is the eurozone crisis over? There is much more hope now. The ECB has bought time.
Professor Steve Keen, University of Western Sydney, and author of Debunking Economics
The ECB has finally decided to become a central bank. The flaw of the whole euro-scheme was that the ECB was a central bank in name only.
This plan is what is necessary because if they actually did purchase the bonds issued by the governments, then the borrowing costs of the governments would effectively be set by the rate the central bank was willing to carry, which could be as low as 1.5%.
So you drastically cut the borrowing cost for the whole euro area.
This is one of the many breakthroughs it had to have.
In a proxy sort way of you have finally got the emergence of a fiscal policy for the whole of the European Union, because the deficits of the countries are going to be funded by the central bank.