Draghi’s QE: bad news for Germany & Greece, death for the euro

Dragula emerged briefly in daylight this afternoon to announce two main things:

1. The QE will run at €60bn per month.

2. It will last until September 2016.

That comes to 19 months, and a total of €1.14 trillion. Europe has a bigger population than the US, and their QE1 amounted to $1.3 trillion in 2009. But how does one calculate the right size for a policy that has fallen flat in its face wherever it’s been tried? For myself, I was rather more intrigued by three other things:

3. Greece will be included “but with certain additional criteria”. It’d be nice to know what these are going to be; one suspects this will be seen by commentators as a negotiating ploy, but I don’t agree. My feeling – for reasons I outlined yesterday –  is that this is Grexit hidden in the small print. My hunch is that Alexis Tsipras is going to turn up for his first Troika session, and be given an offer he cannot accept.

In the meantime, don’t be surprised if between now and Sunday, knowing hints are dropped by Samaras and co to suggest that “Greece won’t be given anything from the QE budget if Syriza wins”.

4. The sole criterion for success will be “a sustained adjustment in the path of inflation.” As time goes on – and QE fails everywhere it’s tried – the goalposts keep moving. The first US QE was intended “to support economic activity”. (In fact, it was a bank bailout). QE2 then got billed as chiefly “to provide liquidity to the private sector” – which it didn’t do. Now Draghi is careful not to talk about any form of stimulation beyond the rate of inflation. The media went on about liquidity creating credit easing and providing a push for the ezone economies, but on the whole the ECB boss was careful to avoid that. He would be, because he knows it won’t achieve any of them.

5. The money “will include some amounts from existing programmes”. Finding out what if anything Draghi has been up to in terms of credit easing to date is a bit like lassoing ether. But I’d love to dig up what other random sums of money have been added to make it seem tastier than it is.

I think some facts need restating.

First and foremost, what we have here is a resurgent Berlin and compliant Brussels telling Greece that Arbeit Macht Frei – and starvation is the sure way to put on weight – for three years, and then suddenly the central bank saying QE will cure it when four Greek banks are already on Emergency Liquidity Assistance. As I’ve said for two or more years now, the EUnatics are unique in that there are two completely opposing schools of thought, and they’re both wrong. I’d expect some eurozone stock markets in ClubMed to show some rises. Anything more than that simply isn’t logical….and I can’t believe Dario doesn’t know that already.

Second, all the three main ClubMed invalids have different disease strains. To apply one solution to that reality is typical supra-national thinking, but it cannot possibly work: Spain has myriad secessionists wanting out, plus a lopsided property-market economic bias; Italy is bankrupt and closer than many realise to default – with a growing europhobic minority; and Greece needs above all to bail out its banks, devalue, and get a corrupt elite off its back once and for all.

Third, we have to ask how long it will be before ordinary Germans start to feel the pinch (the Dax is already down this afternoon) and the Bankfurters – on seeing little or no improvement – start hammering  on Merkel’s door. Look across the German press spectrum tonight, and you will spot an eerie silence where the news of this madness ought to be.

This is another nail in the euro’s coffin. But if there’s one man quite happy to live in a coffin, it’s Mario Draghi.

Earlier at The Slog: why the future must be local community, not European Community