The renewed deterioration in some indicators of economic activity and fears about the political situation in Italy should prompt the ECB to strike a softer tone after its next meeting. President Draghi might hint at a possible future interest rate cut or support for struggling banks through more LTROs. However, he is likely to stress that OMTs will not be implemented for any country that does not apply for an ESM bail-out and accept the associated fiscal austerity – even if the country in need is as big and systemically crucial as Italy.
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