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.

Monetary policy has reduced fiscal pressure in euro area – but interest rate turnaround is coming

Thanks to the ECB's expansionary monetary policy, the euro states have realised considerable funding advantages since Draghi’s ‘whatever it takes’ speech exactly five years ago. Italy alone has since then avoided additional funding costs in excess of EUR 100 billion. An interest rate turnaround is now on the cards, and Italy in particular has to do more to prepare for the return of steadily rising interest rates.

Monetary policy has reduced fiscal pressure in euro area – but interest rate turnaround is coming

Five years of ‘whatever it takes’: three words that saved the euro

Five years ago, on 26 July 2012, the President of the European Central Bank, Mario Draghi, delivered a speech at a conference in London that brought the crucial turnaround in the euro crisis. We take a look back and pay tribute to his words.

Five years of ‘whatever it takes’: three words that saved the euro