The euro crisis is not over and is about to get interesting
Supposedly the euro crisis is all over. The mighty ECB has spoken. I have received triumphalist suggestions from bastions of euro-fanaticism that I should now capitulate
By Roger Bootle
10 Sep 2012
They even suggested that I should send a rebate of fees to my clients. And something to Telegraph readers, perhaps?
Sorry to disappoint, but I am not remotely contrite. On the contrary. Was it not to be expected that Draghi would deliver some sort of bond-buying programme?
How many times since this crisis began have we supposedly been given “the solution” only to find in the succeeding weeks that it breaks in our hands?
What Mario Draghi has done is to deploy the ECB’s undoubted firepower to counter break-up risk in the yields on peripheral debt. If the height of such yields were the essence of the euro problem, then ECB bond-buying would indeed be a game changer.
But it isn’t. High bond yields have been a reaction to the underlying problem, not the cause of it. Indeed, the underlying problem is only partly financial. In several member countries, government finances are perilously weak. But worse than this, their economies show next to no economic growth, or are even contracting. While this continues, their debt ratios will continue to rise.