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News from 2017-07-26 / KfW Research
'Whatever it takes' – a speech and its implications for the euro area
Exactly five years ago, three words spoken by ECB President Mario Draghi marked the turnaround of the euro crisis. After 26 July 2012, ‘whatever it takes’ became a catchphrase. In the context of the debt crisis, it expressed a strong commitment to Europe and the euro area. Today, in the context of Brexit and widespread scepticism over Europe, it stands for a reawakened European spirit that can now be seen not just in the streets but in voting booths across Europe.
Specifically, Draghi’s speech created the conditions for ending the euro crisis and for a new upturn. To this day we are reaping the fruits. Record employment in Germany and strong growth in Europe, after all, are also a result of the bold move five years ago. In particular, the ECB’s monetary policy reduced the risk premiums on European government bonds. According to a new estimate by KfW Research, Italy alone has so far avoided more than EUR 100 billion in additional funding costs thanks to Draghi’s announcement and the subsequent monetary policy. This opens up financial scope that should be used as effectively as possible for reforms to promote growth – because the interest rate turnaround is coming.