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The European Central Bank has acted. Across the 17-nation Eurozone, the benchmark re-financing rate was slashed on Thursday, from 0.5pc to a record low of 0.25pc. In Greece, Spain and other economically-fragile Eurozone members, where inflation is worryingly low, many welcomed the ECB’s action. In Germany, with its historic inflation aversion, Teutonic eyebrows were raised.

What’s beyond debate is that this latest ECB move is the prelude to a renewed round of money-printing. While America’s quantitative easing is meant to be “tapering soon”, in Western Europe the funny-money dials have just been turned up.

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“This sucker could go down”. So said George W. Bush back in 2008, at the height of the global financial storm. The then US President was referring to the massive risks facing the world’s largest economy following the Lehman collapse. Could Dubya’s prosaic words now be applied to the euro? Will Cyprus quit the single currency?

The “bail-in” deal imposed on this tiny Mediterranean nation last week is better than the one mooted less than a fortnight ago. The lunacy of penalizing insured deposits, those under €100,000, has been avoided. While the atmosphere in Cyprus is tense, it is also obviously a relief that, since the banks re-opened their doors last Thursday, after almost a fortnight shut, there’s been no serious civil unrest.
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It’s tempting to dismiss events in Cyprus as insignificant. Mainstream politicians and investors, desperate to keep the flame of Western recovery flickering and the asset price rally on track, insist that the country is “a special case”. After all, they say, this tiny Mediterranean nation accounts for less than one third of one percent of the Eurozone economy.

The hole caused by a pin, though, is an even smaller percentage of the surface area of an inflated balloon. It still causes a pretty big bang. The hard, sharp realities of the single currency’s internal contradictions, similarly, now loom over all member states and, in fact, the entire world economy.
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