Or maybe not.
There is surely no sadder, more pathetic moment in the whole of Shakespeare (and thus in the whole of literature) than when King Lear, in the throes of despair and betrayal, makes one last, desperate threat. “I will do such things — what they are yet I know not — but they shall be the terrors of the earth!”
His intended threat was no more than an abject admission of helplessness and failure. And so it is with ECB President Mario Draghi. CNN reports that he “raised hopes Thursday for a more aggressive and unconventional intervention in European financial markets”. It quoted him saying “The ECB is ready to do what it takes”. But like Lear, what they are he knows not, or if he thinks he knows, he’s not saying.
Perhaps astonishingly, the markets, desperate for any hint of good news, advanced on receiving this gnomic announcement, and of course the commentators are already busy discussing what the ECB’s action might be. Maybe he’ll grant a bank licence to the European Stability Mechanism (ESM), which would allow it to leverage its funds by borrowing. But just now, no one is likely to lend to Europe on acceptable terms — except the ECB itself. So if the ECB prints money and lends it to the ESM, and the ESM buys eurozone sovereign bonds to bring down the Club Med borrowing costs, that’s just Quantitative Easing by another name.
It’s also inflationary, and will disturb the nightmares of Weimar in Germany’s cellar. And it implies debt pooling, with Germany becoming the ultimate guarantor. Draghi may find that the Bundestag, and the German Constitutional Court, and German voters, may want to take a view on that.
The truth is, he’s whistling in the wind, and the markets will soon see that. Only major, long-term fiscal transfers can save the €uro, and Germany won’t play that game. The political consensus behind the €uro is falling apart. Southern voters can take no more austerity, while Northern voters have bail-out fatigue.
EU leaders should stop pursuing their failing and irredeemable dream of Monetary Union, and realise that the only practical solution is to break up the currency. It’s become a bankruptcy machine.
We can say of the €uro, as Kent says of Lear at the end of the play, “Oh let him pass! He hates him, that would upon the rack of this tough world stretch him out longer”.