Sunday 22 September 2019

Donal O’Donovan: 'Super Mario saved the euro, but what now?'

Stimulus: European Central Bank
Stimulus: European Central Bank

Donal O’Donovan

Mario Draghi stamped his authority on the European Central Bank (ECB) and left his fingerprints on the wider European recovery in July 2012 ago with his famous "whatever it takes" comments.

The ECB President pulled down the shutter on his predecessor Jean Claude Trichet's dithering and divisive response to the euro crisis with a commitment to use every tool at his disposal to prevent a collapse of the single currency.

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It's hard to remember now but that was still a close run thing. Seven years on, and a month before Mr Draghi rides off into the sunset, the existential threat to the single currency has been averted - indeed it had probably been secured within hours of theJuly 2012 intervention.

Beyond that though, Mr Draghi's Central Bank has failed to really move the dial. The eurozone economy has been more or less stagnant for a decade. It's been trapped in a non-crisis just tolerable enough that national political leaders have been able to sidestep asking - never mind answering - the question of how real growth can be fostered and sustained in the EU.

The stimulus package unveiled yesterday in Frankfurt was the most sophisticated yet to emerge from the ECB. Newly-installed chief economist Philip Lane had plenty of time as a board member prior to taking up his current job to observe and assess the bank's previous packages.

But it's hard to see what this greater, and now unlimited, stimulus can achieve, beyond of course helping prevent an even deeper stagnation in the immediate term.

No monetary policy or set of policies has so far managed to jump-start the eurozone to a pace where it can keep motoring unaided.

Until EU political leaders - and the German political class in particular - grasp the nettle and are prepared to sacrifice budgetary thrift for pro-growth economic policies then the EU is going to remain a stimulus junkie, hooked on Frankfurt's largess as it drifts into easy-money economic obscurity.

Irish Independent

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