Europe needs an urgent explicatory mea culpa from Mario Draghi and colleagues.

Sir, Martin Wolf, in “Draghi alone cannot save the euro” September 12, writes the following: 

“But the risks of a breakup [of the eurozone] cannot be eliminated. If these are to disappear, citizens of debtor countries must see a credible path to growth, while citizens of creditor countries must believe they are not throwing money down a bottomless pit… Is there any way the ECB on its own could make it more credible that the eurozone will last?” 

Yes there is. Mario Draghi could do a mea culpa, and explain to Europe how he, and his regulator colleagues, messed it all up by distorting the markets with their capital requirements for banks based on perceived risk, which helped create and finance much of the existent “bad equilibrium”. 

That regulation made the banks run for the “absolutely-no-risk” areas, because there was where they could leverage their equity the most, and this not only caused some fairly safe havens to become dangerously overpopulated, like Greece and real estate in Spain, but also stopped small businesses and entrepreneurs from accessing bank credit at competitive rates. 

And then so as to explain how much they understand how wrong they did, he should ask his regulating colleagues, to start looking in at capital requirements for banks with a purpose, like based on job creation potential ratings. 

Then Europe would know why it all went so wrong and therefore be able to believe in why it can be saved… but, again, that of course requires a fair dose of humility from Mario Draghi and colleagues.