Mario Draghi has saved the euro, for the time being, but seems less inclined to help the economies in which it is used.
After stepping in last summer to put the full faith and power of the European Central Bank behind the vulnerable euro zone common currency, Draghi's central bank has been strikingly less aggressive than its peers in taking steps to address unemployment and recession.
With central banks in the U.S. and Japan easing aggressively, that leaves the euro liable to continue its recent gains, making countries in the currency area less able to export their way out of their problems.
The ECB voted unanimously last week to leave rates on hold at 0.75 percent, and took no new steps to stimulate the economy. What's more, Draghi was forthright in remarks following the decision that no such stimulus is now being considered.
"If the decision was unanimous it implies there was no request to have a rate cut," he said, adding later: "We are now back in a normal situation from a financial viewpoint, but we are not seeing an early and strong recovery."
This is despite the zone overall being in contraction, unemployment approaching 12 percent (about double that in Spain) and inflation a moderating, though above-target, 2.2 percent.
It all makes a stark contrast with the U.S. and Japan. In the U.S. the Federal Reserve is experimenting with so-called QE4, in essence pledging to, with conditions, keep expanding its balance sheet with new bond purchases until unemployment falls to an acceptable level.
Policy in Japan is about to get even more radical, with once and now again Prime Minister Shinzo Abe pressuring the Bank of Japan to double its self-created 1 percent inflation target, a move which will likely involve large purchases of a variety of assets by the central bank.
Since markets tend to downgrade currencies whose central bank is creating money, that leaves the euro vulnerable to an economy-sapping rise, despite the fact that its actual economy is clearly less vibrant than that of the U.S. and even arguably less stable than long-suffering Japan.
Indeed, the euro has already risen strikingly since last summer when Draghi pledged to do everything necessary to support the currency, a policy which has been strikingly successful in galvanizing financial markets. Since July 24 the euro is up more than 6 percent on a trade-weighted basis.
That really is just about the last thing that exporters in the euro zone need. A survey of manufacturers' purchasing intentions fell again in December, marking the 17th straight month the sector has been in contraction.
SUCCESS AT A COST
Draghi can, and does, argue that his policies have been successful, and looked at as preservation measures that is absolutely true. Before his blanket underwriting of the euro, peripheral countries were having tremendous difficulty financing themselves and were suffering from surging effective official borrowing rates.
Yields on Spanish and Italian bonds are now back at 2010 levels, having retreated sharply from their previous ruinous highs, and government bond auctions among the weak have been markedly successful. Some confidence is also returning to banks in the weakest areas, with deposit outflows in some cases reversing.
From that perspective, transmission of monetary policy has improved and more of the benefit of record-low official rates is finding its way where it is needed most.
And indeed Draghi argues that monetary policy is unable to address the unwillingness or inability of a worker in Greece to move to the Netherlands.
Even so, the fact remains that the ECB, in pledging to uphold the currency, was only taking up the role that all central banks must fulfill, backstopping a sovereign borrower with its own currency, only really bringing it in line with its peers. And further, the ECB is standing pat at a time when other central banks are loosening conditions markedly.
It is very hard to see the Federal Reserve resting on its heels with U.S. unemployment as high as it is in Europe, much less so in a scenario when its economy was launching itself into another year of recession. The two central banks have different mandates, but the damage of long-term unemployment is pretty similar if you are in Spokane or Seville.
To be sure, the steps the Federal Reserve and Bank of Japan will take in the next year carry with them their own set of risks. There can be no assurance that inflation doesn't rekindle uncomfortably quickly in the U.S., much less against any sharp fall in the value of Japan's government debt, something that could destabilize its banking system.
The cost of avoiding those risks is going to be a stronger euro - a boon to the U.S., China and Japan but a huge cost to Europe.
(At the time of publication, Reuters columnist James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns by James Saft, click on)