It’s Friday today but politics is a seven-day-a-week business and although the ECB did its bit during the five days of the working week, the political wrangling will go on and on.
Yesterday saw a clash between politics and markets as St Mario demanded anything which might pass as a quid pro quo from the political class in exchange for his and his colleagues’ radical action on the monetary policy front. What came back was (who would be surprised?) a lukewarm “absolutely, possibly, maybe”.
Mutti Merkel finds herself in a tight corner. The regional elections of last weekend saw the rise of AfD from the fringes of dissenting debate into the centre of the nation’s consciousness.
Let’s be clear here: AfD is not a neo-Nazi Party. It was founded by eurosceptic macroeconomist Bernd Lucke although it has since been highjacked by the xenophobic Frauke Petry. Its support now comes from the classic demography of the lower middle-class right.
Germany has long been highly conscious of its political history and the extreme right has traditionally had a much harder time than the extreme left. In redirecting itself from its original brief to where it is now, the AfD has moved the political debate by stealth and Merkel knows that.
She is now also faced with an ECB chief demanding that whatever the next step is in moving to an ever closer Union, it has to come from the political class.
MONETARY POLICY, I have long argued in using an automotive analogy, can act as the starter motor but it is not the engine itself. One can make hops and a few yards by using the starter motor but one cannot undertake a journey powered by that alone.
Don’t get me wrong: significant progress has been made across the continent when it comes to realigning both the income and the expenditure sides of national P&Ls but there is still a long way to go.
Things were going quite well, as long as one was prepared to accept the smoke and mirrors surrounding the likes of Greece and Cyprus, and it would be wrong to accuse governments of having entirely rested on the laurels of the ECB and contributed nothing themselves.
BUT THEN CAME Merkel’s defining faux pas in terms of offering open borders to all-comers. Suddenly the biggest dog in the kennel was found to have fleas too.
The once unassailable authority of the country which had got everything right and could not be questioned broke down. Thanks to Merkel, every sovereign country on the path between the Bosporus and the German border was swamped. This is neither the time nor the place to discuss the merits and demerits of German asylum policy but it put enormous strain on south-eastern European countries, many of which do not necessarily subscribe to northern liberal values and for which the surge of refugees and migrants presented a significant challenge, both ethically and financially.
Germany’s political consensus is tottering and right into the middle of this St Mario pitches a curve ball by asking what the next step in fiscal and monetary union is going to be.
In his own words: “I made clear that even though monetary policy has been really the only policy driving the recovery in the last few years, it cannot address some basic structural weaknesses of the eurozone economy.”
Once again he has given the politicians the breathing space which he expects them to use to push through pertinent reforms.
But surely he’s whistling in the wind; the biggest driver behind fiscal consolidation is trapped thanks to a significant minority of eurosceptic voters – and the days when these could be dismissed as a few sad and misguided souls are over.
Jean-Claude Juncker, the Muppet in Chief, was straight out of the blocks to defend the political side by pointing out to Draghi that politicians don’t comment on monetary policy.
ALL THE BIG issues which were central to the debate during the darkest days of the eurozone crisis re-emerged yesterday. It is plain for all to see that many of the problems of cross-guarantees from back then exist in pretty much exactly the same form today. The difference is that Germany’s reluctance to carry the can for all is no longer a matter of not wanting to but now also of not being able to.
Promises to Turkey are being made in exchange for anything anybody can think of and, although I’m not a great fan of President Erdogan, I can’t blame him for taking whatever cash he can and still not believing a single assurance he receives from Brussels.
The grand European project is in crisis out of which nothing other than a big surge in the economy can lift it. Draghi has tried to draw a line in the sand. I’m not sure it will have a greater effect than any of the previous lines he has drawn in the sand.
Toss the June Brexit vote into the mix and there are the makings of a perfect storm.
THE ECB MIGHT be looking to Brussels to pick up the baton and move forward with the banking union but Germany isn’t in the mood to play ball.
Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful weekend. Tomorrow could be the best and the worst day of the year so far. England has a great chance to beat France at the Stade de France tomorrow and to carry off its first Grand Slam since 2003. The Championship is won but the Grand Slam beckons. I don’t care how many tries they score; I’m praying for just one success. Then, roll on Easter.