Fear not, Draghi will save us…

The reason markets didn’t panic after Italy’s referendum result was that investors assumed the ECB would step in.

Italy's No vote in last week's referendum on constitutional reform was supposed to be the next nasty market surprise after Brexit and Trump. Instead, stocks, bonds and currencies all produced "a jaw-breaking yawn", says The Economist. That wasn't only because the markets had priced in the result as none of Italy's problems are remotely new. The key reason is that investors thought "the European Central bank (ECB) would act to stem any panic".

Had the markets reacted by selling off Italian debt, sending yields, or implied borrowing costs, to eye-watering levels, the ECB could have stepped up the pace of its quantitative-easing programme, whereby it buys government bonds with printed money. That would drive up the price and lower yields (which move inversely to prices), alleviating the pressure on the government and averting potential bankruptcy.

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Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.