Mario Draghi, the president of the European Central Bank, caused an optimistic stir last month with his stirring, almost clarion, promise that the bank was 'ready to do whatever it takes' to preserve the euro. 'Believe me, it will be enough,' he added to underline his resolve. Headlines heralded 'the Magic Draghi'.
A week later at the ECB's monthly meeting, the expectations of heroic action or even that A Big Plan was in the works dissolved in mealy-mouthed platitudes that euro-zone countries must work harder on their austerity exercises. When push came to shove, poof! the Magic Draghi dissolved into a puff of smoke.
The ECB made no change last week in interest rates, offered no new policies, least of all any overt suggestion that it should do the normal job of a central bank and act as lender of last resort to lower bond yields in the vulnerable southern periphery countries, notably Spain and Italy.
As blogger Tim Duy wrote, the ECB offered only 'vague promises about policies that may or may not be implemented'.
The language of the statement was classic Eurospeak: 'Exceptionally high risk premia are observed in government bond prices in several countries. Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. The euro is irreversible ...
'Policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination.' And so on, without considering the ECB itself has the best weapon in reducing the risk premia, by buying bonds. But this policy is opposed by Germany, which is pushing for austerity and getting fiscal houses in order first.
Draghi has his supporters, who contend he is playing a clever game, a mixture of trying to soften up both sides and to push them closer together, while keeping the markets at bay.
Blogger Fabius Maximus amusingly summed up this approach by offering Draghi's cue cards:
'1. Lead off with: no change in rates or policies.
2. To periphery: pay your debts, slackers.
3. To euro governments: continue flogging austerity and reform until morale improves!
4. To everyone, most especially myself: the euro is irreversible.
5. About the future: in the coming weeks we'll think about doing stuff.
6. Don't worry: if conditions go into the toilet again, we'll do stuff.
7. What about my speech last week? The euro is irreversible!
8. What will stop the long slide of Europe into recession or worse? Austerity and reform.
9. Why will these things work in the future since they have not so far? The euro is irreversible.'
The risks are all too obvious. For how long will the markets put up with pretence instead of action? Everyone is happily playing a game of make-believe, if you disregard unaffordable 10-year bond rates of near 7 per cent on offer to Spain.
Markets fell immediately in response to the ECB's failure to come up with a plan, and Spain's borrowing costs on 10-year bonds again rose above the critical 7 per cent mark. But the following day the markets rose, as if accepting this return to business as usual. It's a dangerous dance routine.
Greece has slipped under the radar. If you ask economists, the consensus is that it cannot stay in the euro. Requests from Athens for more time or more money to get its house in order, which would then be refused by the so-called troika, could be the tipping point for Greece.
The question would be whether it would also be a tipping point for the euro zone, as other countries took the chance to re-examine the costs and benefits of the common currency while the door is still open for Grexit.
Hostility in Germany towards the profligacy of the southern Europeans is a growing factor. Frank Schaeffler, member of Parliament from the Free Democratic Party, the junior member of the coalition government, accused Draghi of being 'not a saviour but a plunderer of people's savings'.
Bundesbank president Jens Weidmann has led opposition from within the ECB to bond purchases, claiming they reward debt-ridden countries without demanding reforms. Some Germans are terrified of a return to inflation, which they fear that ECB bond purchases would trigger, though this is a case of ancient folk memories of the hyperinflation of the Weimar Republic imposing nightmares on a modest reality.
Nobel economist Paul Krugman has calculated that in the years to 2010, and excluding Medicaid, Florida got a net transfer from Washington of US$31 billion plus, equivalent to 4 per cent of state gross domestic product - that is a transfer, not a loan. 'Aid on that scale is inconceivable in Europe as currently constituted.'
German grumbles are becoming so loud that it is conceivable, though not yet a possibility, Germany might contemplate leaving the euro to be rid of the - as it sees them - tiresome spendthrift complaining southerners. This would be a mistake in that Germany's economy, employment and exports benefited even from the travails of the rest of the union.
The real tragedies are that economies are underperforming and millions of people are out of work while Draghi does his dance with the markets and politicians think only of their own skins and the next election. Europe is a distant dream.