A couple of days ago, Mario Draghi served a sugary (and perhaps slightly alcoholic) beverage to global markets by pledging ECB action to do "whatever it takes" to preserve the Euro.
Unfortunately, it's what Super Mario didn't say that left a cloud of uncertainty, which I think will come back to bite us in the rear sooner than later. Draghi did not say that the ECB would act to preserve to Euro Zone. In other words, it appears that the ECB will purchase Spanish and Italian bonds and thus reduce lending costs in those member states, but Greece's membership is not assured.
An exodus by Greece could still deliver a tremendous blow to Euro confidence and send the PIIGS' yields back up to the danger zone. We have to remember that there is no well-defined path for any Euro Zone state to exit the currency. Hence it seems that a split currency could easily happen- certain debt obligations paid in Euros, even as the drachma is brought back. I'm no currency expert, but I suspect that a cleaner, hybrid-currency solution is possible, but it's not clear whether present leadership is that creative.
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