The European Central Bank was always unlikely to get what it wanted. There was no clear way to reverse the euro zone's falling inflation rate - back down to 0.3 per cent in November. And after an oil price drop of 16 percent in a month, the ECB's goal looks even more firmly out of reach.
True, the euro zone central bank has not yet unleashed its most potent anti-disinflation weapon, the direct purchase of member governments' debt. If German legal objections can be overcome, that might come as soon as the first quarter of 2015. However, quantitative easing largely puts money into banks.
To push up economic activity, and hopefully then prices and wages, these banks have to spread their newly acquired liquidity into the real economy. But liquidity is not a big problem for most banks. They are simply cautious, even after passing the ECB's latest stress test. In October, total loans to the private sector were 1.1 percent lower than a year earlier.
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There is much talk about regaining momentum, and various plans and initiatives. But they will do little to offset a firm commitment to small fiscal deficits and fierce political resistance to big changes in labour practices and industrial policy. Most voters are too rich to want a new order.
Cheaper oil will increase consumers' spending power, although the effect in the euro zone will be muted by high fuel taxes. But the thrifty and ageing European population is quite likely to save rather than spend its windfall. That is bad for tax revenues, and for the ECB, which sees the wave of cheaper energy working through the production system as an irresistible deflationary force.
The euro zone is a region of leverage and economic lassitude. The prognosis is very slow progress with a high chance of crisis.
