More bond purchases, but no boost for the ESM

Despite President Mario Draghi’s pledge to do “whatever it takes” to preserve the euro, the ECB appears unlikely to follow up July’s interest rate cut with further significant policy announcements at its Governing Council meeting on 2nd August. While the securities markets programme might be temporarily revived, Draghi will resist pressure to grant the European Stability Mechanism (ESM) a banking licence and will continue to stress that the responsibility for addressing the fiscal crisis lies with governments, not the central bank.