Europe moves further apart after Bank decision

LAST Friday was a momentous day for the European Central Bank (ECB). Traders across Europe rejoiced as the floodgates were finally opened and ECB President Mario Draghi announced the long-awaited decision to undertake quantitative easing, a policy of purchasing government bonds, which is aimed at stimulating inflation in the eurozone. The decision is undoubtedly excellent news for investors, who are likely to see asset prices rising across the board off the back of this huge cash injection. However, politicians across the Continent will consider the development somewhat more ruefully; for hidden within the announcement was evidence of Germany’s weakening commitment to the European project.

From a purely economic perspective, Draghi delivered almost everything the markets could have asked for. At 1.1 trillion euros ($1.13 trillion), the quantitative easing program was more than twice the size expected and included all the peripheral sovereign bonds that had already been bought by traders in anticipation, raising prices to record highs. Best of all, he suggested that the central bank’s commitment to hitting its 2 percent inflation target was unlimited and that it would continue buying bonds until it succeeded. The man famous for saving the eurozone in 2012 will now do his famous promise of “masterful work with whatever it takes,” for as long as it takes.