Wed Sep 5th, 2012 at 04:18:17 AM EST
In advance of Draghi's important ECB statement tomorrow, Yanus Varofakis posted a piece in which he concludes:
The common currency area is broken. In fact, it is no longer a common currency area but, rather, an area in which the same currency is used. To begin fixing this broken system, without adopting radical measures like those we suggest in the Modest Proposal, the ECB must become the equivalent of the FDIC and the Fed, plus it must work towards turning the EFSF-ESM into Europeís TARP. At the same time, it must unleash an asymmetrical quantitative easing (QE) program that targets the Periphery, thus restoring the circuits of a proper monetary union.
Unfortunately, the ECB will not be allowed to do any of this, I very much fear. Unless I am very badly mistaken, Mr Draghiís announcement on 6th September will show that the ECBís banking supervision role, crucial as it may be, will be undermined by a Germany determined to keep afloat the cosy and unwholesome relationship between Germanyís private banks and German politicians. As for the QE part, the ECB will only be allowed to embark upon such a purchases program in a limited manner; one that buys Europe a little more time during which to continue to stagnate.
The state of the German banks is one of those interesting little time bombs hidden away in the Euro crisis - it seems to me that a lot of what the EU, driven by German demands, has done only makes sense if they're much more vulnerable than they pretend.