I am not a gambler. I won 14 new pence on a fruit machine in a Pontefract pub in about 1975, and decided to quit while I was ahead. But six months or so ago I had a bet with a friend, my contention being that either the Germans would have to start paying to keep the Southern European economies afloat, or the ECB would have to start a QE programme; his that neither of these things would happen.
In middle age, these are the kinds of things you find exciting.
With the news yesterday that the ECB chief Mario Draghi is proposing what he calls the OMT, or Outright Monetary Transaction, a mechanism whereby the ECB can buy bonds of the Southern Europeans, I feel a phone call to my friend is in order. I am trying to remember if any money was at stake.
Will the OMT save the Euro? No. Why? Because, in a sop to the Germans, whose nominee at the ECB Jens Weidemann appears to have voted against the scheme, there will be strings attached for participating countries. That's to say countries whose economies are failing, cutting spending in a tail-chasing death spiral of austerity, are going to have to cut further and faster in order to please the ECB and the IMF. That would be counterproductive in a country that was doing well. But in a country like Spain, with a headline rate of unemployment at 25% and youth unemployment at 50%, it will be a disaster. The Spanish economy will get weaker, not stronger, making the argument for leaving the Euro altogether more attractive.
Moreover, being a can-kicking gesture even more expansive than Draghi's effort earlier this year (the Long Term Refinancing Operation), it will guarantee to make the patient's death throes more rather than less protracted, condemning those of us standing round the bedside to an even longer vigil.
We have had zombie banks and zombie economies. Welcome to the zombie continent.
