It was back at the high-point of the euro-zone’s debt crisis in 2012 that Mario Draghi uttered his famous declaration: The European Central Bank would do “whatever it takes” within its power to keep the euro currency afloat.
The problem: With China’s latest slowdown feeding its way into the European economy, the ECB president has hardly any power left.
The Frankfurt-based central bank has used up pretty much all of its available resources to jump-start Europe’s economy. In March, through gritted teeth, the ECB launched a bond-buying program totaling more than €1.1 trillion and running until September 2016. The “quantitative easing” program is designed to push inflation in the 19-nation currency bloc back up to nearly 2 percent in the coming years.
But the crisis in China has highlighted exactly what the top-table central bankers had feared: An external shock to the system could yet bring the ECB’s inflation goals, as well as the shaky European economic recovery of this past year, crashing to a halt. It’s a fear to which the ECB and other central banks would have no response left.