2012: the year of the Draghi as Mario breathes fire back into markets
Monday, December 24, 2012 - 01:58
Dec. 24 - At the start of 2012 the euro zone was staring into the abyss. But ECB chief Mario Draghi came to the rescue, and markets took off. Can they continue flying in 2013? Jamie McGeever reports.
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At the beginning of the year the euro zone was staring into the abyss.
Some analysts believed debt-laden and depression-hit Greece would be forced out of the 17-nation bloc, and market mayhem would ensue.
But "Grexit" never happened. And if you'd bought Greek bonds - perhaps the most toxic asset of all - after the country's debt restructuring in March, you would have doubled your money.
Much of the turnaround came in the second half of the year.
ECB chief Mario Draghi said the bank would do "whatever it takes" to save the euro, and "believe me, it will be enough".
Since then the euro has surged around 10 cents, and European stocks more than 10 percent. Italian and Spanish borrowing costs have plunged too, and the risk of a euro zone break-up has receded dramatically.
So is the worst is over?
SOUNDBITE: David Jones, markets analyst, IG, saying (English):
"We've seen definitely calmer markets in the last six to eight months, we're coming up to the end of 2012. We've got the German stock market near multi-year highs. The FTSE's seems to be ending fairly near the highs for the year so markets are buoyant.
But markets may struggle to match the returns of this year in 2013, even as central banks remain committed to printing money and keeping the world financial system oiled with ample liquidity.
The U.S. could fall back into recession if lawmakers in Washington fail to reach a deal on averting the so-called "fiscal cliff" - $600 billion of automatic tax hikes and spending cuts due to kick in on January 1.
SOUNDBITE: Majoj Ladwa, TJ Markets, saying (English):
"When the markets start trading again it's likely that equity markets - if the situation isn't resolved - could start pricing in the negative aspects of this whole episode, and that is the US economy potentially going into recession at some point in the first or second quarter."
And yes, when the U.S. sneezes, the rest of the world still catches a cold.
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