European Central Bank alone can't save the euro zone

Since Mario Draghi said two years ago that he would do whatever it took to save the euro, many governments in the common currency bloc seem content to let the European Central Bank do all the heavy lifting.

That may explain why growth has been weakening and outright deflation is now a very real risk. Draghi, the bank chief, has been going in the right direction by pursuing his own version of quantitative easing. But his bank's efforts need to be coordinated with credible fiscal responses if there is to be enough firepower to return the economic zone to a real growth trajectory.

Now, the new European Union Commission chief, Jean-Claude Juncker, has come to the rescue. At least he hopes to be seen as doing just that. The €315 billion (HK$3 trillion) investment scheme he announced last week to "kick-start" the euro-zone economy appears to be just what the doctor ordered - that is, until we look at the fine print. Juncker argues that the 28-nation bloc's economic malaise stems from a drastic lack of investment, which remains well below pre-crisis levels. The plan he proposes is to use existing money from current budgets to leverage new loans and guarantees to encourage the private sector to make new investments.

So there is no new money, and what real money there is, amounts to about €8 billion from the commission and a further €5 billion guarantee from the European Investment Bank. The rest depends on heavy leveraging. Juncker and his commission colleagues hope somehow to reach €315 billion in new investments to be made by private companies across the euro zone over the next few years. Many economists have questioned whether such leveraging will work.

EU leaders may be clever because they are taking little risk by not committing new money. But with so little real money on the table, the stimulus risks being much less than meets the eye. If this doesn't work, the ECB will remain the only heavy lifter. That will dim the prospects for a return to growth for the entire euro zone.