Markets: News  

MarketWatch First Take

Draghi doesn't back up the talk

WASHINGTON (MarketWatch) -- One notion that can quickly be put to rest is the idea the Federal Reserve didn't take action on Wednesday because it knew the European Central Bank was about to unleash a bazooka, because all ECB President Mario Draghi did on Thursday was point to a weapon without any ammunition in it.

Yes, the ECB may act, Draghi said, but no new action was undertaken. Read more on Draghi's press conference.

The ECB could make bond purchases in an unsterilized manner, or it could not, Draghi added.

Wait, what? What did you say in London last week?

Draghi did allow that the tone of the speech he gave declaring the euro is irreversible, which had so excited the world, was "strong." But he said the speech didn't actually mean the ECB has to do anything.

"The speech doesn't say anything about timing, bond buying," Draghi said.

Indeed not.

Draghi talks the talk and may at some point walk the walk. Or not.

What Draghi really has revealed is that he hasn't outmaneuvered the elephant in the room, the Bundesbank, which is ferociously resisting a new round of bond purchases of Spanish and Italian debt.

The divisions are not new, and neither is the inaction, from either the ECB or the euro zone's governments. Europe's policy makers are forever willing to snatch defeat from the clutches of victory.

--