On late Sunday night, the European Central Bank (ECB) signaled it would begin an unprecedented intervention in European markets in response to the escalating debt crisis, and particularly to protect Spain and Italy, the New York Times reports. The ECB indicated it was ready to start buying Italian and Spanish securities.
Why now? The global economic situation is becoming increasingly drastic. After the S&P downgraded the U.S. credit rating, the ECB was "under extreme pressure to try to do something to restore confidence," according to the Times, and prevent an "extension of the stock market rout that began last week." The U.S. saw the worst stock market week in three years last week. Stock markets in the Middle East fell in Sunday trading, and, the Times reports, "the Tel Aviv exchange delayed opening for the first time since the collapse of Lehman Brothers in 2008." In Europe, the situation is particularly acute for Italy and Spain. Analysts said to the Times that Italy "posed a threat to the financial system too great for any one economic superpower to cope with alone, and that a coordinated effort was needed." Uri Dadush of the Carnegie Endowment for International Peace said Sunday that without intervention, Italy ‘‘would be a Lehman-type situation."