Who averted the collapse?

"Spain was then on the point of collapse," said our economy minister, Luis de Guindos, the other day in Brussels. In the first half of 2012, the sovereign debt storm was raging after the second Greek bailout. The risk premium had been rising relentlessly since February. Nobody wanted to finance the Spanish economy. Or the Italian.

The premium soared to its maximum inter-day spike (649 basis points, and 541 for Italy) on July 26. What happened on that day that stopped the rise and began the descent? Well, someone said: "The ECB will do whatever it takes to preserve the euro, and believe me, it will be enough." That someone was the European Central Bank's president. "One word from Mr Draghi was enough to make the risk premium begin to fall, not only in Spain but in the whole South of Europe," as Socialist leader Alfredo Pérez Rubalcaba put it recently in Congress, exhibiting, for the members' edification, a self-explanatory graph of spikes and plunges.

So the threat of collapse receded. The drop in the premium "has nothing to do with concrete measures taken by the countries;" its "key factor is the disappearance, or significant reduction, of the risk of breakup of the euro — thanks to moves made by the ECB, not by national governments," said the prominent banker José Manuel González-Páramo in El Mundo on January 13.

Rajoy went through the motions, but the director of the orchestra was another Italian, Mario Monti

Rubalcaba and Páramo only tell the simple truth. The ECB acted, stopped the hemorrhage, and calmed the panic. Just as the Federal Reserve did in September 2008 and as central banks in emerging countries are now endeavoring to do. What is specific about July 26 is that these were only words. Magic ones. Not even measures. Mario Draghi's virtual intervention. Nothing unorthodox or scary. But this story and this graph raised blisters, because they made nonsense of Prime Minister Mariano Rajoy's claim, made in the same session, to have played the leading role in preventing the collapse: "The reforms undertaken, the correction of the public deficit and the political will of the Spanish government were keys to containing the situation in the markets." Only as an afterthought did he deign to mention the European Council and the ECB.

In fact, the Popular Party reforms had yet to produce confidence. The labor market reform in February had produced some results: applause in the markets, and another 675,000 unemployed. The financial reform had produced the June bailout. But the risk premium kept rising. Rajoy claimed to have played leading roles in the major projects launched that June, saying was the letter of the "fourteen" (in fact twelve) European prime ministers, on February 20, that produced the "Pact for Growth," when in fact it was the 120 billion assigned to demand stimulation. This resulted from pressures on Angela Merkel, exerted mainly by François Hollande, soon after he took office on May 15.

Rajoy adduces that it was at that summit that "banking union was first spoken of," when the three pillars thereof were addressed earlier, on May 23. And earlier, on May 21, Draghi had already used the term in the EU parliament.

And he boasts that his (later) letter on June 6 (the "five points") was decisive in calming the markets, while accusing Rubalcaba of "shabby falsification" of history. True, Rajoy wrote letters and went through motions. But the director of the orchestra, who did the fighting in all the meetings (apart from Hollande) was the Italian, Mario Monti. On June 20, a week before the EU summit, at the G20 meeting in Mexico, he called for the ECB, instead of giving loans, to buy peripheral bonds in secondary markets - automatically, when the premium surpassed a certain threshold, and without demanding adjustment plans. All this took shape in the OMT (Outright Monetary Transactions) plan for "unlimited" debt purchase, culminating in the magic words on July 25. Our Mariano was essentially a spectator. It was mainly a matter of Marios.