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ECB boss Draghi buys some time

Yesterday's announcement of plans for potentially unlimited buying by the ECB of the government bonds of peripheral eurozone countries buys time. But unless and until the deep underlying problems of the euro are addressed, a question mark will remain over the future of the single currency.

In the 10 months since he became ECB president, Mario Draghi has done more to address the problems of the eurozone than his predecessor, the lamentable Jean-Claude Trichet, did for the whole of his seven-year term.

To get to the point we are now at Mr Draghi has had to overcome formidable obstacles, principally the opposition of the German central bank, the Bundesbank.

Hats off to Mr Draghi. While the Bundesbank is still adamantly opposed to his plans he seems to have isolated Bundesbank boss Jens Weidmann on the ECB's ruling council and to have secured the tacit support of German Chancellor Angela Merkel for his plans. However, there is still much that could go wrong.

Next Wednesday the German constitutional court is due to deliver its ruling on a case brought questioning the compatibility of last December's fiscal compact treaty with German law.

Even if the constitutional court strikes down the case, yesterday's statement by the German Economy Minister Philip Roesler that bond buying was not a permanent solution emphasised that, as far as the German government is concerned, Mr Draghi remains very much on probation.

Further complicating matters is the condition imposed by the ECB that it will only buy the bonds of countries that have entered into a formal programme, ie a bailout such as we in this country are enduring.

Spanish Prime Minister Mariano Rajoy remains adamantly opposed to such a move pointing out that, with unemployment in his country already at almost 25pc, there is only so much pain that Spain can be expected to suffer.

With Spain needing to roll over €40bn of debt next month, will Mr Rajoy meekly submit to a bailout or will he instead be tempted to call the ECB's bluff by threatening to default with potentially disastrous consequences for the eurozone?

The situation in Italy, where elections are due to be held next spring, is equally volatile. Former Prime Minister Silvio Berlusconi, whose political career seemed to be over when he was forced to resign last November, is staging a remarkable comeback.

He owes the ECB no favours and has been making increasingly eurosceptic noises in recent weeks.

So, while Mr Draghi has achieved a remarkable degree of progress over the past 10 months, it will only be when these and other sources of instability have been overcome that we will finally be able to call time on the long-running eurozone crisis.

Irish Independent