Europe is sometimes described as having committed to unlimited QE just like the US but the reality is that this couldn't be further from the truth. The Outright Monetary Transactions (OMT) programme is a combination of stick and carrot which pressures governments to implement competitiveness reforms. By doing so, the scheme becomes not just a monetary policy but a supply-side policy. This demonstrates extraordinary reach for central bank policy. And what makes this reach even more extraordinary is that Draghi has so far achieved Sir Mervyn's dream…the OMT has applied huge stimulus without actually doing anything. And what has the policy achieved?
It has accelerated the pace of monetary base expansion in the wider Eurozone. More specifically, however, it has reversed the pace of decline in specific periphery states where monetary conditions were tightening even as recession worsens.
David Fuller's view This is an interesting point and I maintain that Mario Draghi is transforming global expectations regarding Europe. The perennial problems of competitiveness and economic growth remain but Europe is in far better shape today than most people dared hope six months ago.
If the ECB President can regenerate sustainable European GDP growth over the medium term, the global economy's biggest problem in recent years will have been largely resolved. Currently, the trends for Europe's two most important share indices - Euro STOXX 50 and the Euro STOXX Bank Index - have been in recovery mode since Mr Draghi was appointed as head of the ECB.