Chances of achieving Europe's 'grand bargain' diminish

THE need for a "grand bargain" in Europe to relax fiscal policy and tighten the European Central Bank's (ECB) monetary stance is becoming greater than ever in the face of lacklustre growth, high unemployment and anti-governmental "populism".

But the chances that this will happen are diminishing, as a result of increasingly hazardous political constraints on necessary Europe-wide action.

Europe is trapped in intersecting vicious circles where ending the ECB's easy money policies would unleash financial market turmoil, yet continuation risks widening the political and economic fragmentation that the ECB is trying to overcome.

At the end of a relatively calm summer for the member states of monetary union, the threat of a mishap plunging the euro bloc into new turbulence seems as hi…