Three little words

The markets got very excited about three little words at the end of last week. Spanish and Italian bond yields plunged, and the euro and euro-zone stock markets rose sharply, in response to ECB President Mario Draghi’s pledge to do “whatever it takes” to preserve the euro. But they either missed or ignored three other little words uttered by the President which could prove to be just as important – “within our mandate”. They suggest that a likely revival of the Securities Markets Programme will not signal a more comprehensive and concerted ECB effort to address the euro-zone crisis.