European stock markets have rallied in the last few months as it has become clear that bureaucrats in Brussels will be more lenient on countries, giving them more time to reduce their deficits and debt levels. It has led many market participants to herald "the end of austerity" in Europe, thrilling holders of equities.
But during a news conference Thursday, ECB President Mario Draghi made clear more than once that "governments should not unravel efforts" to contain spending. So is Draghi still pro-austerity? When a reporter asked Draghi if he is "the last man standing" when it comes to a commitment to austerity, he responded: "Fiscal consolidation is, and I've said this since the very beginning of my tenure, is contractionary in the short term and in the medium term as well. So you want to mitigate this. You want to take action to mitigate the contractionary effects.