European stocks plummeted and the euro gave up gains yesterday as investors showed deep disappointment at the European Central Bank's (ECB) failure to flesh out plans to avert further fiscal crisis.
Market expectations in recent days had risen to frenzy ahead of the ECB meeting after president Mario Draghi pledged last week to do "whatever it takes" to preserve the single currency.
Investors had been hoping for a clear timetable for intervention in bond markets to ease soaring borrowing costs for Spanish and Italian sovereign bonds.
But in the end, investors were left feeling underwhelmed. Although Mr Draghi reasserted his commitment to supporting struggling euro-zone countries, he did not offer any imminent plans to purchase sovereign bonds as markets had been hoping for.
The ECB also opted to keep interest rates on hold at 0.75 per cent.
The FTSE Eurofirst 300 gave up earlier gains to drop by 0.1 per cent to 1,057.74 shortly after the ECB's monthly press conference.
After trading at a one-month high against the US dollar before the meeting, the euro fell back to $1.2198.
"The risks surrounding the economic outlook for the euro area continue to be on the downside," Mr Draghi said.
"They relate, in particular, to the tensions in several euro-area financial markets and their potential spillover to the euro area real economy."
Pressure for action has intensified in recent weeks as speculation mounts that Spain may follow Portugal, Greece and Italy in needing a full sovereign bailout.
In an effort to ease borrowing costs for peripheral euro zone nations, the ECB had launched the now-dormant securities market programme. It made purchases amounting to just over €200bn (Dh906.46bn).
Mr Draghi said there was a need for governments to do their bit.
"In order to create the fundamental conditions for such risk premia to disappear, policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination," he said.
Tim Fox, the chief economist at Emirates NBD, said there was only so much the ECB could do.
"Without fully fledged political union and debt mutualisation, which the ECB cannot deliver, the cracks at the heart of the single currency will continue to grow," he said.