Super Mario tackles deflation risk

Will Mario Draghi’s unprecedented measures manage to revitalise the eurozone economy? asks Kyran Fitzgerald

LAST week, the commander of European Allied Financial Forces, Mario Draghi, unleashed his latest financial offensive. Early progress was reported by Supreme Command. The enemy forces appear to have melted away — for now. Sort of. So who are the enemies and what precisely has Mario done?

The real enemy, we are told, is deflation — falling prices, implying rising real indebteness. As prices fall, the mountain of debt in real terms grows. This is bad news for a country like Ireland which has, pretty much, the highest public and private debts combined as a proportion of national output in the world for an economy of its size.