On July 26th 2012, as investors feared for the very survival of the euro, Mario Draghi, the president of the European Central Bank (ECB), promised to do “whatever it takes” to preserve the single currency. “And believe me,” he said, “it will be enough.” It largely was. Mr Draghi’s words, which were then followed by an announcement that the ECB would buy an unlimited amount of a troubled euro-area state’s sovereign debt, calmed financial markets. The premium demanded by investors to buy Spanish and Italian government bonds fell.
The covid-19 pandemic has brought the three magic words back into fashion. In mid-March they were mentioned in the press as frequently as they had been in 2012, as politicians and officials around the world sought to contain the ravages of the new coronavirus. On March 17th leaders of the G7 countries promised to do whatever it took to achieve strong growth. When America’s Federal Reserve committed itself to buy unlimited amounts of government and corporate debt on March 23rd, that was written up as its own “whatever it takes” moment. A few days later leaders of the G20 countries promised to spare no effort to protect lives and livelihoods. Rishi Sunak, Britain’s chancellor of the exchequer, has used the phrase, as have politicians in Spain and Italy.
Will these efforts prove as successful as Mr Draghi’s? Confronted with a lack of confidence in the single currency, he was able to reassure the markets through words alone: indeed, the ECB has not yet had to conduct the “outright monetary transactions” that were promised in 2012. This time politicians face a tougher task. They must tackle the tangible effects of the pandemic, the full extent of which is not yet known, on people’s health and incomes. Various stimulus packages have stabilised stockmarkets for now. But Mr Sunak’s intervention, for example, did not have the transformative effect on Britain’s stockmarket that Mr Draghi’s achieved on euro sovereign-bond yields. Perhaps the only thing that can be said with certainty is that it is too soon to judge how successful leaders’ utterances have been.
This article is from our Graphic detail section.