The European Central Bank is facing a full-blown leadership crisis. Mario Draghi’s authority is ebbing, with powerful implications for financial markets and the long-term fate of monetary union.

Both Die Zeit and Die Welt report that three members of the ECB’s six-strong executive board refused to sign off on Mr Draghi’s latest statement, an unprecedented mutiny in the sanctum sanctorum of the ECB’s policy making machinery.

The dissenters are reportedly Germany’s Sabine Lautenschläger, Luxembourg’s Yves Mersch, and more surprisingly France’s Benoît Cœuré, an indication that Paris is still hoping to avoid a breakdown in relations with Berlin over the management of EMU.

The reality is that a full six months after Mr Draghi first talked loosely of a €1 trillion blitz to head off deflation risks, almost nothing has actually happened. The ECB balance sheet has shrunk by over €100bn.

Talk has achieved a weaker euro but that is not monetary stimulus. It does not offset the withdrawal of $85bn of net bond purchases by the US Federal Reserve for the global economy as a whole. It is a zero-sum development.

The clash comes at a delicate moment amid Italian press reports that Mr Draghi may soon go home, drafted to take over the Italian presidency as the 89-year old Giorgio Napolitano prepares to step down. Such an outcome is unlikely. Yet there is no doubt that Mr Draghi has pressing family reasons to return to Rome, and he barely disguises his irritation with Frankfurt any longer.

This incendiary column in the ARD Tagesschau gives a flavour of what is being said in Germany. Fairly or not, Mr Draghi is accused of losing his temper, refusing to listen to objections, cutting off Bundesbank chief Jens Weidmann, and retreating to a “narrow kitchen cabinet”.

The latest dispute was over a change in the wording of the ECB statement on its balance sheet. While it appears semantic and trivial – whether the €1 trillion boost is “expected” or “intended” – the underlying clash is serious. The hawks will not be bounced into full-fledged quantitative easing before they are ready. They are patently playing for time, still hoping that the Rubicon may never be crossed.

David Fuller's view

This is very interesting and it points to a breakup of the EU and a shrinking of the single currency.  Some will regard it as wishful thinking but it makes sense to me, not least as I have long felt that the EU would have already broken up in a disorderly manner had it not been for Mario Draghi’s skilful management of the ECB.  Moreover, Ambrose Evans-Pritchard is well informed and often prescient. 

I attribute this unravelling to hubris.  The original European Common Market was a great idea.  Unfortunately, its founders viewed this as no more than a stepping stone to what we see today, and they, or their followers dreamt of a ‘United States of Europe’.  This plan was probably too flawed by socialism to succeed, and it has not.  Democratic freedoms have also been eroded by the EU’s unelected, over privileged bureaucracy.  It suggests that a large and culturally diverse continent with centuries of history cannot be successfully run as a single country. 

Europe’s collective will to maintain the EU is draining away.  The separation process is largely unpredictable but may be a lengthy and somewhat tumultuous event.  Hopefully, the sensible idea of a European Common Market of separate states will survive, peacefully combining the considerable best of what Europe has to offer.