The European Central Bank's plan to shore up the eurozone seemed to have done the trick, at least in the short term, with stock markets surging yesterday on the back of the bank's pledge to buy the bonds of ailing eurozone members.
Borrowing costs for Italy, Spain and Portugal also plummeted in response to the ECB's move, while the euro surged early yesterday as the full implications of ECB chief Mario Draghi's plan had markets purring with pleasure.
"Draghi has lowered the risk premium towards the euro," said George Saravelos, a strategist at Deutsche Bank. "We expect the euro to rise above $1.27 in the near term. The single currency also hit a two-month peak against the Japanese yen and one-month high against the Swiss franc.
Yields on Spanish 10-year government bonds fell to 5.8 per cent – the first time they have been below six per cent since May. Italian bond yields were down to 5.13 per cent. The stock markets in France and Germany neared six-month highs during the afternoon. But disappointing job numbers from the US took a little wind out of the sails of the global stock market as the day progressed.
The ECB bond-buying scheme – known as outright monetary transactions – will only come into being when a member state requests help and has applied to two EU bailout funds. As yet none of the ailing eurozone nations has asked the ECB to buy its bonds, but the existence of what Mr Draghi called a "fully effective backstop" has been enough to convince many that this time around, the eurozone means business in tackling the government debt crisis.
"The ECB delivered effectively everything we were looking for and more. We are surprised by the level of detail and directness of the statements on additional monetary policy measures," said Scott Thiel, deputy chief investment officer at BlackRock.
But markets have reacted positively before to attempts to ease the euro crisis, only to go into reverse once the political squabbling starts among EU leaders. And the ECB's scheme is definitely seen as more of a time-buyer than a magic bullet.
"The new strategy buys time and will enable the member states to fund themselves more effectively but, with a slowing global economy and uncompetitive exchange rate, it will not contribute to higher GDP or lower debt ratios," said Ted Scott, F&C director of global strategy. "For that to occur, a more fundamental change in strategy is needed which is something the politicians have to decide upon."
Whether or not the good mood lasts depends on national governments sticking to their plans to reduce their debt levels. "We need two legs," Mr Draghi said in presenting the new tactics. "Governments have to undertake the policy reforms. There is no intervention by the central bank, by any central bank, that is actually effective without concurrent policy action by the governments."
There are also question marks over whether the conditions set for ECB intervention are too strict for politicians in Italy and particularly Spain, both of which are struggling under the weight of austerity. In addition, as the ECB's decision last year to pump a trillion euros into the financial system showed, there is still the potential for major problems in the eurozone banking sector.