Macroscope | Time for ECB to man the quantitative easing pumps

The European Central Bank has been long on promises and short on delivery for too long. Two years after president Mario Draghi pledged to do "whatever it takes" to save the euro, the euro zone is still sinking into an abyss of deflation and recession.

The euro zone is fast reaching a point of no return. Quantitative easing by the ECB - buying bonds and printing money - could be its last chance for survival.

So far, ECB policy has failed spectacularly. The euro has been close to collapse in recent years. Strong headwinds continue to batter the economy, with growth grinding to a halt. Economic confidence has been in retreat for months due mainly to weak internal demand.

The fallout from the euro-zone financial crisis - debt deflation, deleveraging and acute fiscal austerity - has taken a toll on confidence. Consumer sentiment has been pummelled by record unemployment, an income squeeze and negative wealth effects. Company output and investment plans have been shelved as optimism has tumbled.

The ECB missed an opportunity in the early phase of the crisis to co-ordinate simultaneous quantitative easing with the United States, Britain and Japan. Collective monetary intervention would have been a much more effective counterpunch to global recession and deflationary forces in their early stages. Intractable German Bundesbank dogma was probably to blame.

From 2009, the US, Britain and Japan threw their full weight behind quantitative easing, proving that "printing money" could revitalise demand and boost growth. Gross domestic product growth in the US and Britain accelerated to more than 3 per cent, while rapid job creation turned the tide on high unemployment. Japan's "two lost decades" of recession, stagnation and deflation were brought to an end with renewed quantitative easing initiatives under Abenomics.

There is still a window of opportunity for the ECB to make up for lost time and embrace quantitative easing, but it is closing fast.