ECB policy u-turn

It looked like routine speech to investment bankers in London, but both the timing and the location were chosen carefully and wisely. British Prime Minister David Cameron, IMF chief Christine Lagarde and Prince Charles were among the audience.

So, on July 26, 2012, European Central Bank (ECB) President Mario Draghi knew this message would get maximum attention: "The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."

"Within its mandate" preceded this sentence, although journalists often chose to omit this important addition.

"In the short term, he managed to calm the markets," Thomas Mayer, chief advisor to Deutsche Bank told DW. "Long-term, he also triggered a shift in policy within the EU's Monetary Union," he added.

Laying down the law

Draghi warned anyone against speculating on the euro and it worked - the markets calmed down, the interest paid on sovereign debt dropped to bearable levels and investment drain from southern Europe was curbed.

"If Mario had done nothing, the eurozone would have been in danger of collapsing," Michael Heise, chief economist at Allianz told DW. "And that would have cost the German taxpayer a lot more than any of the loans issued to avert that scenario," he added.

But the relative calm in the markets has cost the ECB dearly, critics argue. It meant the central bank had to fundamentally change its monetary policy approach.

"Up until then the first priority was to adhere to the Maastricht criteria - meaning each state is liable for its own finances. Since Draghi's speech, the euro always comes first and the conditions under which it is being issued come second," according to Mayer.

Breaking a taboo

To preserve the currency union, the ECB is now prepared to buy unlimited government bonds, if that's what it takes. The word 'unlimited' was hard for some to swallow. Critics say a central bank's only real task is to maintain price stability, full stop.

If the ECB starts buying government debt, it would break a monetary policy taboo, as it would amount to state financing. It could also fan inflation and reduce pressure on crisis-stricken southern European countries to press ahead with reforms.

"If the ECB's guarantee does reduce the pressure for reforms and the consolidation of budgets, the skeptics will be vindicated," Mayer said. And it certainly looks that way at the moment.

The Greek government's parliamentary majority is hanging by a thread, the Portuguese government looks far from stable, neither does Spain's. Italy has not accomplished much in the way of reforms and France is still thinking about whether it is going to introduce reforms at all, or carry on muddling through.

Cleaning up the mess

Should the reforms be implemented, all could be well, says Mayer. "But if they're not, if those countries get stuck in a recession and if they ask for the ECB's help, the central bank will have to do whatever it can to save the euro in its current form."

It would mean that the ECB would be essential in cleaning up the mess and would end up being a one-stop crisis shop for eurozone members.

So, one year on from Draghi's speech, what has happened? Nothing, say the optimists. The bond-buying scheme is in place and ready to go, but it hasn't been used yet. "The ECB is the only central bank that hasn't bought any government bonds in the last 16 months. Draghi's words alone have been enough to calm the markets. We should see that as a success," Heise believes.

And, of course, we still have the euro and the 17 - soon to be 18 - countries using it. So, for the optimists at least, all is well.

Not so - say the critics. Much has happened - the euro has moved away from the foundations of the Maastricht Treaty, has betrayed the formerly immovable feast of a central bank that's solely focused on price stability.

The pressure to reform has eased on those countries who most need them and it is only a matter of time before the ECB starts handing out money to crumbling member states, skeptics warn. They fear the worst is still to come.