This was a red-letter day but our recovery is in the balance
Published 05/09/2014 | 02:30
IT would be fascinating to know how Ireland's man at the European Central Bank voted yesterday and what went through his mind. The vote is secret for now so we won't know but we can guess. Like other governors, Patrick Honohan has taken an oath to consider the fortunes of the euro zone as a whole so he probably voted in favour of the stimulus package.
Still, he almost certainly felt queasy about the possible dangers for Ireland of a €500bn programme of asset purchases.
The good news is that exports will boom. The bad news is that savers and those trying to buy houses are probably in for an even rougher ride than recently.
Cheap cash will also act as a salve that makes real reform appear, for a time, unnecessary.
The worst case scenario is that we begin believing our own propaganda again and start lecturing Europeans about how to run their economies.
Mr Honohan and his colleagues are well aware that European Central Bank is entering dangerous territory but they have their backs to the wall.
The French are in trouble and show little appetite for getting their own house in order. The Germans are also in trouble but refuse to acknowledge this yet despite an economy that is contracting and dangerously reliant on consumer spending.
That has forced the ECB to take real action.
The reduction in interest rates was cosmetic, but other measures were significant and would have been unthinkable just a few year ago when Jean Claude Trichet sat behind Mario Draghi's desk.
It was a red letter day in the short history of the ECB for the head of the central banks to talk openly about the possibility of full-blown quantitative easing.
Full-scale quantitative easing may yet come.
That all lies in the future but there is no doubting that yesterday's measures were significant and took investors by surprise.
We know this because the euro fell to its lowest level in over a year and endured the largest one-day decline since late 2011 at the height of the eurozone crisis. While it is difficult to understand the detail of what happened yesterday, most economists outside London seem to believe that the ECB appears to devised a subtle mechanism suited to the euro zone's diverse economies.
The programme will take time but the history of the ECB is that English-speakers accustomed to the often gung-ho policies of the US Federal Reserve often underestimate the quietly-spoken Draghi.
These economists want "big bazookas" but there are other ways. Europe is not America and we do things differently here.
Ultimately Ireland needs a strong euro zone to prosper so we must hope that yesterday's measures will be enough.
The prayer must be that the help for the euro zone does not choke our recovery simultaneously.