No, not the new Morecambe & Wise of Politics, it’s “Behind the curve Merv” as I may have, well did, call him in the past; showing that perhaps he really isn’t so far adrift. Amazing what happens when the Governor of an independent Bank of England genuinely feels independent of political control.

In his press conference on Wednesday he raised a number of key points, which also draw the spotlight onto other events this busy week. The issue of our own fiscal deficit and growing national debt was raised: “It is the single most pressing problem facing the United Kingdom; it will take a full parliament to deal with and it is very important that measures are taken straight away to demonstrate the seriousness and the credibility of the commitment to dealing with that deficit.”

This clear statement (and I’m sure recent events in Greece) made it much easier for the new coalition government to get straight down to business on the deficit reduction, although from watching the news I am still less than convinced that some in the government get it.

Still, listening to Radio 4 on Wednesday morning comments from William Hague on the rapport struck between negotiators from the two parties started to provide a little hope that partisan rubbish might be put aside for a while. This hope was reinforced by seeing the leaders working well together in front of the press. Prometheus generally avoids discussing politics (not to avoid upsetting various sensibilities, just a general dislike of the species) but it is worthy of a paragraph this week. Anyway, back to Merv’ and the co-ordinated Greek bailout package that was announced on Monday.

“I do not want to comment on a particular measure by a particular country, but I do want to suggest that within the Euro Area it’s become very clear that there is some need for a fiscal union to make the Monetary Union work.” Well that has always been obvious to the sceptics. No sorry that’s wrong, not sceptics, those that didn’t buy into the idealistic nonsense, understood economics and had an eye for history. Still the optimism engendered by the bail-out effort (which ultimately WON’T WORK without debt restructuring/default and will throw good money after bad and result in even more debt being generated) appeared in even the most surprising corner.

On Wednesday the highly respected Martin Wolf wrote in the FT that the EU appeared to have accepted that to avoid the massive chaos of default, and the exit of a member from the Euro, that the inevitability of some central fiscal control had dawned as the alternative was too awful. Ah, the sad belief in human rationality. Gets you every time! The EU apparatchiks may happily try to enforce what would effectively be a single unelected government, but the populous at large, as they struggle under renewed recession, may have other ideas. See how the Spanish opposition is already angrily talking of Spain being a European “protectorate”. Niall Ferguson, writing in Newsweek (before the bailout announcement) headlined his article “The Death of the Euro”, which may be going too far but tough times are ahead.

The problem is that the rescue simply buys time at the expense of raising funds from other indebted countries to finance the debt of even more indebted countries. Genius. Economic restraint alone in Greece will not save it from having to restructure its debt eventually, with all the knock-on consequences and pain across the global banking system. Ireland after all is busy doing the right things and its deficit still grows because the cuts hit GDP, which lowers tax receipts, which offsets the spending cuts, so more spending has to be cut, which ....you see where this goes. There is a slim chance Ireland can work its way out of this hole, particularly if global growth picks up, but don’t place any bets.

The bigger picture across the Eurozone looks tricky and frankly adding more debt won’t help. Worse the sudden removal of planned tax cuts in Germany, that could stimulate their internal demand, that are having to be made to pay for the debts generated by the rescue package, will suppress domestic spending and add to the deflationary pressure facing the continent. And if that wasn’t enough the most positive element of the rescue package, a form of ECB QE, is likely to remain watered down under German anti-inflation pressures. Looking past the optimism of recent days (even very poor rebound EU growth figures were received with joy) it is hard to see how things won’t ultimately get a lot worse for the Eurozone, and that is bad news for us as we face years of austerity while they remain our main trading partner.

In place of an “and finally”, below is a quote from an economist for whom we have a great deal of respect and who fears German led ECB policy is likely to lead to depression: “The British tradition within which we work allows us to be quite rude about public figures, more so than is normal on the continent or in the US. But to describe accurately the conduct and mental abilities of German policy makers over the past decade would even exceed my limits. Anybody who thinks that either Europe or Germany requires fiscal deflation as a response to recent events needs a brain transplant.”

And if you need a real chortle read the deluded pro-Euro piece by Tommaso Padoa-Schioppa in today’s FT for it almost defines political LSD.