Mario Draghi claims he can save the Euro.
I don’t buy it… even for one second. As far as I can see the ECB has one of two “Bail Mary” options. They are:
1) Massive money printing and buying of sovereign debt
2) The issuance of Euro-bonds along with across the board banking backstops.
As I noted in a recent article, #1 is impossible. If the ECB does this it will implode the bond market, which means GAME OVER for all intervention. Look at the impact QE had on Treasuries and you’ll see what I mean. And that’sTreasuries we’re talking about… not PIIGS debt.
Now let’s consider the ECB’s second “Hail Mary” option: the issuance of Euro-bonds and across the board backstopping of EU banking deposits.
For starters, Angela Merkel has said that there will not be Euro-bonds for “as long as [she] live[s].” This is not a bluff. The issuance of Euro-bonds goes against the German constitution. If Merkel were to even consider this option she would likely be kicked out of office (remember she’s up for re-election next year).