Bond yields have plummeted to record lows across the eurozone as deflation becomes lodged in the system and markets bet on a blitz of asset purchases by the European Central Bank this month.

German five-year yields dropped below zero for the first time ever, touching -0.007pc on the first day of new year trading, implying that investors are willing to pay the German government to store their money for the rest of this decade.

Italian, Spanish and Portuguese yields have seen spectacular drops over the past two trading days. The French state can borrow for five years at a rate of 0.13pc, and Ireland can do so at 0.32pc.

Nothing like this has been seen in European history since the 14th century, after the depletion of silver mines set off a slow monetary contraction, followed by Edward III's default on debts to Italian banks and the Black Death soon after, compounding a deflationary collapse.

And:

Mr Draghi is clearly walking through a political minefield. The Bundesbank continues to resist QE, arguing that lower oil prices are a shot in the arm for the real economy and therefore make monetary stimulus less necessary - even if it depresses headline inflation.

Mr Draghi may be forced to accept a compromise on QE, either by scaling back his plans or by accepting a formula where the national central bank of each EMU state buys only the bonds of its own government, with no pooling of risk.

Critics say this would be highly risky. It would further fragment the euro system, and might cause markets to have second thoughts about the stimulus effects of QE. Yet Germany remains adamant that there must be no fiscal union by the back door.

Mr Draghi’s comments also had the intended effect of driving down the euro to $1.2034 against the dollar, the lowest since the Greek crisis in June 2010. Fresh “COFER” data from the International Monetary Fund show that central banks from the G10 rich states and emerging markets became net sellers of eurozone bonds in the third quarter of 2014 – even when adjusted for currency valuation effects.

David Fuller's view

This will be an interesting month for Euroland, to put it mildly, with potentially more to follow throughout 2015. 

Is there any silver lining for international investors?  Yes, I think so.  Europe’s multinational corporate Autonomies, although handicapped within their home Continent, are much cheaper than their rivals in the US stock market.  The Euro’s downtrend against the US Dollar, currently testing its 2010 and 2012 lows, is creating opportunities for long-term investors. 

For instance, German Autonomies such as BMW, in which I invested last month, remains just as competitive internationally.  Daimler (chart contains a temporary data error from last week) is of similar quality.  If / when the Eurozone breaks up, Germany will inevitably have a stronger currency, whether on its own with the Deutsche Mark or as part of a smaller alliance of largely Northern European countries.