The European Central Bank promised new support and schemes on Wednesday to ease a market downturn that has raised concerns of a new debt crisis on the southern edge of the europe. But this is seen as a bit disappointing for investors who expect a bolder move.
The cost of government borrowing has soared in the European bloc that it has forced the ECB to raise interest rates to tame the high inflation that is depressing the European economy. Markets recorded disapproval as the ECB did not detail its plans to limit these borrowing cost increases, raising concerns that policymakers are complacent with the situation of more indebted countries, such as Italy, Spain and Greece.
Faced with the threat of a recurrence of the debt crisis that nearly toppled the single currency a decade ago, the ECB offered a way out by planning new support schemes and channeling cash from debt maturing during the 1.7 trillion euro pandemic to indebted countries.
The ECB said, "The Governing Council has decided to mandate the European Committee to expedite a new framework of anti-fragmentation instruments for consideration by the Governing Council."
Speaking at a conference on Wednesday, Dutch central bank chief Klaas Knot said that policymakers had begun calling for the realization of new tools as collateral in case of insufficient funding channels.
Investors welcomed the ECB’s intentions but remained frustrated by the lack of details and lack of strong commitment.
The euro depreciated around 0.7% against the dollar after the ECB statement was released.
The ECB move comes ahead of the FOMC meeting where the Fed is expected to raise interest rates, with investors sharply raising their bets for a 75 basis point increase, a change in expectations that has triggered sell -offs across world markets.
