The dance had become so routine that we at the Brussels Blog were thinking of giving it a name, the Eurozone Two-Step.
Ever since the eurozone crisis first rocked international markets nearly five years ago, European Central Bank chiefs – first Jean-Claude Trichet, then Mario Draghi – sent a very clear message to the currency union’s political leaders: we can only act if you act first.
The deal was never explicit, but both sides knew what was required. The ECB’s first sovereign bond purchase programme in May 2010 came only after eurozone leaders created a new €440bn bailout fund; its €1tn in cheap loans to eurozone banks in early 2012 only came after political leaders agreed to a new “fiscal compact” of tough budget rules.
But with the markets watching Frankfurt closely for signs Draghi is about to launch another bold move – US-style quantitative easing, purchasing sovereign bonds to halt fears the bloc is headed into a deflationary spiral – there are new indications one of the partners is no longer dancing.
Back in October at a eurozone summit, Draghi was able to get a little-noticed statement out of the assembled leaders committing them to another “Four Presidents Report”, a reference to the blueprint delivered in 2012 that set a path towards further centralisation of eurozone economic policy. The report helped kick-start the EU’s just-completed “banking union.”
Progress on that 2012 blueprint has since stalled, however, and at his last summit press conference, then-European Council president Herman Van Rompuy said the new “Four Presidents Report” would be delivered at the December EU summit, which starts next Thursday. Many in Brussels saw this as the quid for Draghi’s quo – once the leaders agreed to another blueprint for eurozone integration, Draghi would have a free hand to launch QE.
But according to a leaked draft of the communiqué for next week’s summit, Draghi may have to deliver his quo without a eurozone quid. The text (which we’ve posted here) makes clear that leaders have no intention of delivering a new blueprint any time soon. Read more