Draghi's Shield Under Attack as Politics Exposes European Risks

Mario Draghi may be the euro region’s great protector, but investors can still get hurt.

From Portuguese government bonds to Italian bank stocks, the most stressed parts of the euro region are providing a reminder that the European Central Bank president’s stimulus and safety-net programs don’t bring immunity from losses. It’s an alarm that could prove timely if a series of political risks from Spain to Greece materialize.

With the ECB’s crisis-busting Outright Monetary Transactions program unveiled in 2012 and the quantitative-easing plan since last March, markets were mostly anesthetized to politics until now. While they look nothing like they did during the meltdown five years ago, investors wondering when the drugs would start to wear off may have their answer.

In reality, the countries that characterized Europe’s sovereign debt crisis from 2010 to 2012 never went away as potential sources of turmoil for financial markets.  

There was the arrival of a government in Portugal antagonistic to the reforms of its predecessor, the potential for a similar one in Spain and the looming threat that Greece’s rescue program will unravel. The simmering refugee crisis also has the potential to crack the consensus underpinning the European Union. All this, when the global economic hinterland even has Apple Inc.