It’s all about the V-word, apparently. That’s a nod not to Winston Churchill, but a rather different character – namely Mario Draghi, President of the European Central Bank. It would appear a eurozone quantitative easing program running to €1,100bn (£795bn) isn’t enough. Having churned-out €60bn of virtually-printed money a month since March, and committed to maintaining that pace until September 2016, Draghi has now signaled there’s likely to be even more.
“The degree of monetary policy accommodation will need to be re-examined at our December meeting,” he said last week, following the latest gathering of the central bank’s Governing Council in Malta. The “size, duration or composition” of eurozone QE could be adjusted, Draghi continued, with the monthly amounts getting bigger or the schedule extending into 2017 and beyond.
Global equity markets ended the week on a positive note, buoyed by signs of progress on EU debt talks with Greece and a glimmer of East-West rapprochement at the Minsk summit. Stocks rallied on both Thursday and Friday, with investors’ risk appetite rising as German Chancellor Angela Merkel shook hands with, and then smiled at, Greek Finance Minister and Negotiator-in-Chief Yanis Varoufakis. That came alongside a Ukraine ceasefire deal – again, brokered by Merkel – which pushed European shares and bonds higher, amid hopes of easing tensions between Russia and the West.
Then we had news of better than expected eurozone growth during the fourth quarter of 2014. The combined economy of the 19-country currency bloc expanded 0.3pc during the final three months of last year, reported Eurostat, with GDP rising at an annual rate of 0.9pc. This improvement was led by a 0.7pc increase in German national income, compared to just a 0.1pc expansion the quarter before. There were also indications of stronger growth in some “periphery” member-states, with Spain and Portugal notching-up figures of 0.7pc and 0.5pc respectively.
So now, there can be no question about it. The possibility of “eurozone exit” is real. For years, some of us have been arguing, until we were blue in the face, that the eurozone could break-up. For years the bien pensants have told us we were wrong. Only a fool would say that now. Greek exit could happen. To have worried aloud about the euro unraveling has been to be widely derided. I should know. I wrote my first national newspaper column predicting some nations could end up quitting the eurozone almost fifteen years ago, before monetary union even began.
Those of us who’ve long pointed to the technical incongruity of a single currency area with no common fiscal policy, were shouted down. Concerns about competitive variations, and different countries’ needs for exchange rate adjustment, at different points in time, were waved away, with condescending accusations that the great unwashed didn’t understand Franco-German “political will”.