Madrid stocks slumped more than five per cent as investors looked on in vain for the measures they had hoped would help stabilise Spain’s borrowing costs, while other European markets were down as well, reversing early gains.
The yield on Spanish 10-year bonds rose from 6.6% before Mr Draghi spoke to 6.9% afterwards, while Italian 10-year bond yields rose from 5.7% to 6.2%.
The euro briefly topped US $1.24 after Draghi spoke of possible ECB market intervention, but plunged on concerns that he announced no concrete measures.
Last week, Draghi had promised that he would do everything in the ECB’s powers to save the euro, raising hopes that the ECB would intervene directly on government bond markets to force down borrowing costs for Spain and Italy.
Analysts were expecting more details and immediate action from the ECB, but were disappointed.
“Once again, we have no commitment to action from the ECB, and no execution of promises previously made,” said Carl Weinberg, chief economist at High Frequency Economics.
In his speech, Mr Draghi said that the ECB’s bond-buying process would resume, but that it would differ from its Securities Markets Program (SMP), which involved buying large quantities of government bonds on the open market. Instead, he added the new scheme would involve buying short term bonds, also making it clear that the market intervention is a short term measure, to keep the markets happy until governments solve their own problems.