All approaches to save the euro from the crisis that is shaking European unity to its foundations have failled. The EFSF, which provides no more than a guarantee, is already overwhelmed by the magnitude of the potential defaults in peripheral countries. Even as the gravity of the situation has become evident, the Germans have refused to authorize massive bailout funds. And governments in some of the peripheral states, namely Spain, Greece and Italy, have not adopted the severe austerity plans that would satisfy northern Europeans by putting credible debt reduction plans in place.
Is a Greek default followed by a euro breakup inevitable? It seems to me that the eurozone now has only one escape route to salvation, which is Mario Draghi, the new governor of the European central bank. Draghi has already shown a different attitude toward the ECB’s role by cutting interest rates. If he were to begin buying peripheral bonds in massive quantities, in a eurozone version of quantitative easing, he might be able to singlehandedly save the euro.
Does he have the authority to do this? Would be be supported in the ECB governing council? Would he be willing to take such a radical step? I don’t know the answer to all of those questions. But it looks to me at this point that the euro has only one chance of survival after months of indecision by European leaders and attacks from dubious markets, and that chance lies in Draghi’s hands.