We seem to be watching a delicate ballet. All of a sudden, Angela Merkel envisions fiscal discipline and ECB action. Soon after, Mario Draghi talks about sequencing – first fiscal discipline, then ECB action. For those of us who have been arguing for months that we need both together, this is music to our ears. But for all of us who have seen so often vague statements concealing an inability to understand what financial crises are, it is a bit early to cheer up.
Angela Merkel’s vision of fiscal discipline combines the authority to tell undisciplined countries what to do and enforce long periods of austerity in order to inject them with Germany’s cherished ‘culture of stability’. This will not work.