When the European Central Bank president Mario Draghi held his press conference today, the German news agency DPA’s reporter Scott Solano was present at the event.
Solano had solicited to ask Mr. Draghi questions on behalf of the readers of Zero Hedge, a popular financial website.
The Zero Hedge readers had urged Solano to ask questions about what the European Central Bank will do to protect the single currency and European Union in case a member state quits the euro.
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Initially, Draghi hesitated, and it seemed like he would avoid the question as it was far too hypothetical. But finally he answered it.
Solano had two questions on behalf of Zero Hedge readers: “One, let’s say the situation in Spain or Greece continues to worsen. And eventually they are forced to or they decide to leave Eurozone, does the ECB have a plan to prevent the markets from collapsing? Do they have any safety net or structural system in place, especially in derivatives?”
Solano’s second question was about the Emergency Liquidity Assistance: “What would have happened to the €10 billion Emergency Liquidity Assistance in Cyprus had the country decided to step out of the Eurozone?”
Mario Draghi started by saying that the questions are so hypothetical that he doesn’t really have an answer to them. However, he agreed to give a partial answer.
Mario Draghi said Zero Hedge readers vastly underestimated the importance of euro for Europeans when formulating questions. They didn’t understand the amount of political capital European countries have invested in the single currency. And these people keep asking questions like what if a country leaves Euro or what if the currency breaks down. The euro is not like a sliding door. There is no plan B because such situations must be avoided at any cost.
Last year, Draghi pledged to do everything possible to protect the single currency. Draghi said ECB has demonstrated its determination to contain any redenomination risk. That’s the answer to Solano’s first question.
The second question about ELA again assumes “if Cyprus leaves” which Eurozone won’t allow to happen. So, there is no plan B.
Watch the video by visiting this link. The dialogue between Mario Draghi and Solano starts at 57:45.