Mario Draghi: Markets calm now after fears about the Italy faded away

Mario Draghi ItalyMarkets have stabilized quickly after election results in Italy were announced and any threat of contagion was deflated, said on Thursday the European Central Bank President Mario Draghi, suggesting that there is no need for an urgent adoption of measures in support of Rome, according to Reuters.

“Markets after some excitement immediately after the elections have now reverted back, more or less, to what they were before,” said Mario Draghi yesterday after the ECB announced that the benchmark interest rate for the eurozone was not changed, at a record level of 0.75%.

ECB relaxed the tensions in financial markets when it announced that it is committed to acquire unlimited government bonds in the euro area, but only if that country will accept austerity measures. The conditions of the new program – Outright Monetary Transactions (OMT) – are still discussed and Italy might be outside of the ECB protection if it will not be able to manage to form a government in charge with adopting regulations set by the ECB in exchange to buying government bonds. OMT is still a work in progress, as an effective help and the regulations are known, said the head of the ECB.

Unlike the first program, called Securities Markets Programme (SMP), in the new program – Outright Monetary Transactions (OMT) – there will be no limit on bond purchases. The ECB hopes the new program will be more effective in reducing financing costs of euro area countries as market interventions will depend on the commitment of governments to initiate reforms.

Italian outgoing Premier Mario Monti warned on Wednesday that if recent elections will produce a government that abandons further economic integration with Europe, the Italians would have to go to ballots again. No party won a landslide victory in national elections last month and now Italy’s president will not convene discussions on government formation. It is expected that leader Pier Luigi Bersani, center-left, to make a first attempt to form a new government.