Expectations for the meeting had been high since Draghi in a speech last week vowed to do “whatever it takes to preserve the euro,” triggering a firestorm of speculation about what that meant.
Carl B. Weinberg, chief economist for High Frequency Economics, pointed out in a note to clients how careful Draghi was Thursday to use the word “may” instead of “will” when discussing possible remedies. “Once again,” Weinberg wrote, “we have no commitment to action from the ECB, and no execution of promises previously made.”
Many analysts took the lack of immediate action on Thursday as an indication that efforts at compromise between Germany — which has objected to restarting bond buying because it would put more stress on its own economy — and the rest of the ECB countries had resulted in a standoff.
In announcing possible bond buying “of a size adequate to reach its objective” and by painting a picture of urgency in efforts to move ahead with bond buying by saying various committees would meet over the next few weeks to draw up detailed parameters, Draghi in effect fired an opening salvo against Germany.
While each of the 23 members of the ECB governing board has one vote — meaning that in theory the German central bank has as much power as those of Malta or Cyprus and could not veto action if the others supported it — European powers have been reluctant to move forward with any large-scale action without Germany's backing.
“There is going to be ongoing concern that the final effectiveness of the policy could be diluted by these objections from Germany,” Howard Archer, chief European economist for IHS Global Insight, said in an interview.
The euro crisis has moved into a new stage in recent months as some of the continent’s largest economies — Spain and Italy — have seen their borrowing costs soar relative to those of Germany. Draghi said this development concerns him, as increases in bond yield spreads are “usually ominous.” Greece, Portugal and Ireland were forced to seek bailouts when their borrowing costs reached the level that Spain’s and Italy’s are at now.
Draghi also called on governments to “stand ready” to use their bailout funds to intervene in the markets themselves. But Draghi stressed that no action would be taken until troubled countries apply to have the European Financial Stability Facility, which was created in 2010 to provide financial assistance to euro countries, to purchase their bonds. Spain and Italy have held off from doing so to avoid the imposition of what they see as onerous requirements.
Italian Prime Minister Mario Monti and his Spanish counterpart Mariano Rajoy, speaking at a joint news conference in Madrid on Thursday afternoon, vowed to work together to solve the crisis but did not say whether they would seek to activate the bond purchasing.
The ECB announcement comes during a week of intense discussions among top officials on both sides of the Atlantic. U.S. Treasury Secretary Timothy F. Geithner flew to Germany to meet with his counterpart there, and Monti visited Paris.
Shortly after Draghi’s reassurances last week, German Chancellor Angela Merkel and French President Francois Hollande also seemed to imply something big was in the works when they issued a joint statement pledging to do everything possible to keep the euro zone from breaking up.
Meanwhile, the ECB and some other central banks appear to be taking a wait-and-see approach.
The ECB on Thursday left its main interest rate unchanged at a record low of 0.75 percent, as expected. Its decision comes on the heels of a Bank of England decision earlier in the day to hold its key lending rate at 0.5 percent and a Federal Reserve announcement Wednesday that it would also hold near-zero rates steady.
Underscoring the governing council’s view of the deteriorating situation, Draghi said it had discussed lower interest rates but ultimately decided to continue monitoring.