Business Spectator

Draghi’s central bank thwarts any attempts at economic reform by taking yields pressure off periphery governments. It keeps a terminal monetary union on life support without curing its many diseases. It creates vast amounts of money which one day may well create inflation outside asset markets, where it is already underway. And it is an imaginative monetary scheme that keeps on giving as long as the next shot of monetary stimulus is in sight – but not a single day longer.

Berlin is only focussing on the fiscal crisis since it does not want to change its own ways. But as long as the Germans are unwilling to accept that they are part of the problem they cannot offer workable solutions to others.

The tragedy of the European crisis is not that it was caused by striving for too much economic efficiency. The real tragedy is that it could have been predicted by public choice theory

Europe has run out of easy solutions to its many simultaneous crises. When it runs out of money to even buy itself more time to gloss over the symptoms of a dysfunctional monetary union, perhaps European leaders will finally start tackling the underlying problems. Time has become unaffordable

Whoever believed that the never-ending eurozone crisis had been solved during the holiday break would have been surprised by the difficult French bond auction last week, Italian yields once again shooting above the crucial 7 per cent mark, and renewed speculation about a Greek default.

Both the Bank of England and the German Bundesbank enjoy formal independence, but this independence looks and feels very different in practice. One can be free of all vices without having a single virtue. In the same way, central banks can be formally independent without adding to economic and financial stability.

In a more optimistic scenario, European politicians would realise that the euro cannot be saved and stopped pretending otherwise. But perhaps it is already too late for such naïve Christmas wishes.

Perhaps it is dawning on Cameron that he had been moved like a pawn on a chessboard by his continental friends. His insistence to act in Britain’s national interest mainly served to promote the interests of France and Germany. Power politics does not get more ironic than this.