Not saying you're wrong, but both the ECB's competence and nerve are overrated IMHO.

I think EVERBODY is heading for ZIRP and I think the BoE was just quicker to the draw than the ECB for the historical/cultural reasons you mention above. Germany needs to prop up its exports so I think the ECB will come under alot of pressure to weaken the Euro and this will coincide with lots of bad debt in the banks, especially Deutsche. The Swiss example surprised me at the time, but it's like a microcosm of Germany cos they abandoned a history of hard money in order to prop up exports and horribly overleveraged banks.

I suspect Europe is behind the UK on the credit cycle a little. Remember the US had it's dollar crash while sterling was high and the Brits were laughing at the yanks over it, then BOOM four months later sterling tumbles. I suspect the Germans are about to go through the same humiliation. Don't really know, though.

I'm quite happy with weak sterling for a year or two if it'll prop up the economy and then apprpeciate before I start looking to buy foreign assets.

Ultimately, however, the institution is untested. Will they flinch? No on knows. But, the common belief is they will not. By the way, I should mention that the Swiss National Bank, previously the hardest of the hard money crowd, has effectively reverted to a zero interest rate policy. So there's a precedent right there.

Nick, where do you come down on this one?