Careful with the use of the G word. Seems to be a bit of a trip wire here still.

The Hun is always either at your throat or at your feet. Winston Churchill

b) "and that the German dominated ECB also has some culpability in the continuing crisis."

Let's do the time warp again? Are you stuck in the Trichet era?

c) Draghi and the majority of the governing council isn't the problem. National governments are.

You can replace Ireland with at least five other countries.

So the current board should be punished for the sins of their predecessors?

He said many of the regulatory people he spoke to for his report The Irish Banking Crisis; Regulatory and Financial Stability Policy 2003-8 were "shattered" by what had happened.

They felt something had gone badly wrong, they weren't sure why, and not sure what they could have done differently. No one was going around saying "these things happen", he said.

...

Inquiry chairman Ciarán Lynch (Lab) asked about what happened to 1995 Central Bank rules that aimed to set credit concentration limits for banks.

Prof Honohan replied that he didn't know. He supposed that when the rules were introduced, the Central Bank "hadn't realised they would be so far away from what the banks were likely to want to do".

The rules were "on the books" but were considered "a mistake", he said.

...

He agreed with Deputy Pearse Doherty (SF) that the government didn't want to interfere with the banks, and it was not just the government, but the "whole regime".

The European Central Bank faces another moment of truth as its governors debate whether to buy up the sovereign bonds of euro zone countries to avert a deflationary spiral. At issue still is the attitude of the German faction in the bank, which is resolutely opposed to such moves. But what explains this stance?

The stock response is that German hypersensitivity over the use of central bank printing presses can be traced right back to the country's painful encounter with hyperinflation in the 1920s, when the Weimar Republic printed more and more banknotes to finance expenditure.

Analysts insist there is more to the story than that, although the printing of money to finance expenditure (monetary financing) is anathema in Germany. Such concerns were at the heart of the independence granted to the Bundesbank when it was set up in 1957.

--snip---

The institution was a success. It was not for nothing that the ECB's independence was enshrined in European law, together with a prohibition on monetary financing.

These principles carry huge force, all the more in Germany. Former ECB chief Jean-Claude Trichet cast himself as an ardent defender of the bank's freedom of action, but observers said he had to be more radical in his language because he was French. Jean-Claude Juncker, who leads the EU Commission, once said of Trichet that "he speaks of the need for an independent central bank in an almost erotic manner".

Whatever about that, it is clear that many of the ECB's interventions since the outburst of crisis in 2007 have run into German resistance.

Axel Weber, the Bundesbank chief who was being lined up to succeed Trichet, left in protest at the ECB's first forays into bond markets. The ranking German on the ECB executive board, Jürgen Stark, soon followed.

In 2012, Weber's successor, Jens Weidmann, voted against the scheme in which the ECB pledged to buy bonds in unlimited quantities to keep a country in the euro. The promise brought the most acute phase of the debt emergency to a halt, a good thing. But the Bundesbank made a point of publicising its deep displeasure at the move.

Price stability is a concern here, yet there is more. In a 2012 paper for the European Council on Foreign Relations, analysts Sebastian Dullien and Ulrike Guérot traced elements of the wider German response to the debacle - including harsh fiscal retrenchment, punitive bailout terms, debt limits, etc - to the economic theory of "ordoliberalism" which was in vogue in the country from the late 1940s to the mid-1960s.

The theory, which opposes intervention into the normal course of the economy, rejects the use of expansionary fiscal and monetary policies to stabilise the business cycle in a recession.

"While ordoliberalism nowadays is no longer an important academic current in Germany, most economists have at some point in their career been influenced by ordoliberalist ideas," wrote Dullien and Guérot. This, in turn, feeds into the "neo-classical" consensus among mainstream economists in Germany, and in particular attitudes towards economic policy co-ordination, external imbalances, budget consolidation and bailouts.

I am still perplexed that the National Central Bank Governors of net debtor states haven't done more to act in concert and formulate a more expansionary monetary policy and that Germany and its allies have been so successful in blocking or delaying action.  

If you look at the performance of the ECB Governing Council as a whole, it compares unfavourably with the FED and the Bank of England, but that is partly by design (under the Treaties) and thus beyond the scope of the Council, and partly a consequence of German led resistance to more pro-active monetary policies.

It galls me that those opposed to (say) QE can be so sanguine about the ECB failing to meet its one and only target and still go on about the risk of inflation, as if that should be the number one policy concern at a time of huge youth unemployment.

Krugman has taken similar issue with the deficit hawks and inflationistas on the right of the US political spectrum who basically want to destroy the welfare state and will change rationals at will to suit that one policy objective.

It saddens me that the "social Europe" which used to include a concern for social solidarity and regional cohesion has now been replaced by a Darwinian "may the devil take the hindmost" market ethic.

The EU is, and should be, more than a facilitator for globalization and is in danger of disintegrating in the face of nationalist extremist elements preying on the weakest who the EU has left behind.

Part of the solution may require Treaty change - or Germany leaving the EZ - but I believe a lot more and should be done to embolden the ECB to take more decisive and timely action in the face of the ongoing crises.

The EZ will continue to under-perform at a global level until and unless these issues are addressed, and if that requires a radical overhaul of the ECB or a German exit, then so be it.

The first step, however, is to stimulate debate in member states and the EP to encourage National Governments and Central bank Governors to take a more robust stance on monetary policy in general.  That involves a process of economic education, and I thank you for your contribution to that process.

Index of Frank's Diaries

Russia may lift its ban on food imports from Greece in the event it quits the European Union, Russian Minister of Agriculture Nikolai Fyodorov told a news conference in Berlin on Friday.

Fyodorov is leading an official Russian delegation to the International Green Week public exhibition for the food, agriculture, and gardening industry.

"If Greece has to leave the European Union, we will build our own relations with it, the food ban will not be applicable to it," he said.

Firstly, it is a good demand, because the ECB is still the enforcing arm of the austerity regime that is strangling economies. It was established as the enforcing arm with the threath of creating bankcrisis that the state can not solve while in the euro, thus forcing the state to de facto leave the euro. The ECB has as far as I know not renounced the threath if the states would step out of line and abandon austerity.

Say that Syriza wins the election in Greece, nationalises a bank or starts a new one, borrows all the euro the state needs from that bank which in turn borrows it from ECB. Now Greece can fund itself with a funding cost that is the operation cost of said bank plus cost of borrowing from ECB. Will ECB then cooperate or will it sever the Greek banks from the euro?

Secondly, it is also a good demand because it highlights the lack of relevant body to sack the ECB board and their general position of unelected and unsupervised power. I do hope the Irish Parliamentary inquiry finds some sympathetic MEPs to channel their questions through, the more supervision the EP establishes over ECB, the better.

Thirdly, it is a good demand because the ECB needs to feel heat from the anti-austerity camp to make them less prone to cave in to pro-austerity demands.

Since none of us have the power to actually sack the ECB board, the question of wheter it would be wise to sack them right now is less important.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

Nevertheless would a resignation call now serve any useful purpose?  Would it not strengthen those forces seeking an even more restricted role for the ECB?

On balance I feel we now have no choice but to wait and see whether QE has the desired effect and raises growth and inflation rates. When combined with much reduced oil prices, reduced interest rates and an even further devalued Euro, you have to hope that the EZ economy cannot but make a belated recovery.

Index of Frank's Diaries

As one European country after another fails or risks failing, imperiling the Euro, with repercussions for the entire world, the last thing the powers that be want is for Iceland to become an example.