It took six months of humiliatingly empty rhetoric and bluster, before Europe's press corps, or rather just the FT's Michael Steen [5], finally asked perhaps the one most important question regarding the OMT, which does not stand for On Merkel's Tab, but rather "Outright Monetary Transactions" (full Draghi definition here [6]) and is the magic "open-ended" bond-buying bullet and SMP replacement that has stabilized Europe: namely "what is it?" That it took so long for reporters, and by implication, the markets to actually point out that the emperor is indeed naked and inquire into the legal working of the ECB's deus ex machina is a testament to just what lengths the broader public has been zombified into believing that "the less you know, the better" historically, one of the KGB's better known slogans.
The exchange which begins at 46'50" in the clip below has to be seen to be believed because it confirms what we have said all along: the ECB is hoping and praying it never has to use the EMT, because at that point Draghi's excuse that the OMT is like porn and one just needs to see it to recognize it, will be woefully insufficient to preserve the insolvent Eurozone.
The exchange follows this earlier statement [7]by Bernanke:
Draghi: On OMT, I mean the rules of OMT are what they are. So we will see, and it is not in our capacity. The ball is entirely with the governments; I have seen this on and on and on. OMT remains, is in place. It is a very effective backstop, and it is there. But you know the rules."
Which leads into this:
Steen: Mr. Draghi, you just said that we know the rules on OMT. I don't think I am alone in saying actually that I don't think we do. The only thing I am aware of that you published a 440-ish word statement that you sent out to us in September, and other than that it feels like we've pieced it together. So would you consider giving us at some point a written point by point this is how it works, this is what a country must do, or is this a deliberate policy to keep it a little bit vague.
Draghi: I am not sure I understand your question. I think by now, and in fact you stopped asking questions about how the OMT works because you understood how it works. I mean we've gone through all the conditions that would make a country eligible for OMT, and we said that this would be a necessary but not sufficient condition for the ECB to step in, and we listed the conditions. If you are referring to the legal documentation, that's another thing, we are still working on it, and it's coming out but that's it.. The OMT had never been created to support countries in their access to market; OMT was meant as an effective backstop to remove the tailrisk from the Euroarea.
And there you have it: Mario Draghi just described Europe's naked Atlas, who is supposed to backstop trillions of sovereign debt on his imaginary shoulders without even one legal term sheet in existence, and without any formalized set of rules in place. Just the mere promise that no matter what happens, the ECB will step in and bail anyone out, no questions asked, and with absolutely no actual framework for implementation.
Remember: the rules are what they are. And according to the surgeon general questioning the rules in insolvent Europe is hazardous for your health.