Global Economy

Maybe Draghi’s policies can buy time for deeper “structural changes” in the periphery, although quite what those are and what difference they would make in the near term remains elusive

More likely, a shift in ECB policies would make the European situation uglier. For one, Draghi would essentially be conceding fiscal dominance, demonstrating that if governments run budget deficits, they can count on the central bank to finance them.

Perhaps Draghi is planning the same game with fiscal authorities that the Banca d’Italia used to play with Italian politicians in the 1980s and early 1990s -- keep interest rates low enough to prevent fiscal collapse, yet high enough to keep fiscal prudence as a priority. Make no mistake about it, inflation or not, this is a strategy of high real interest rates.