By: Dr. Mike Campbell

When Mario Draghi replaced Jean-Claude Trichet as President of the European Central Bank on the first of November it was probably with feelings of dread and relief: relief on the part of Trichet that he was retiring from the post and dread on the part of Draghi at being plunged into the perfect storm of an on-going sovereign debt crisis, failing global demand and loss of market confidence.

Speaking to the European Parliament’s Committee on Economic and Monetary Affairs, Mr Draghi stressed his belief that the Euro was here to stay; the comments were somewhat at odds with remarks made to the Financial Times in an interview where he warned on the cost of a Eurozone break-up. He had warned that any nation leaving the Euro would find itself mired in inflation and would be much worse off; so it is easy to see where confusion could have arisen.
Mr Draghi told the committee: "I have no doubts whatsoever about the strength of the euro, about its permanence, about its irreversibility. But you have a lot of people, especially outside the euro area, who spend a lot of time in what I call morbid speculation, asking 'what if, what if'."

The ECB delivered its six monthly report on financial stability. It cautioned that there was a risk that the world could fall back into recession, in the worst case. In a gloomy prediction, it warned that the danger of two major banks failing defaulting within the coming year was the highest it has been for four years. The report was critical of politicians for failing to take rapid and decisive moves over the Euro crisis which they suggested had made matters worse. However, Mr Draghi applauded the recent EU leaders’ summit meeting for the moves taken to strengthen the EFSF and move towards a tighter fiscal union.