A powerful policy mix -- consisting of easy credit conditions, a moderately relaxed fiscal stance and bold structural reforms -- is driving the euro area's improving growth prospects.
An extraordinary monetary expansion is the most widely recognized – but not correctly understood – part of that winning combination.
Strangely, the prevailing opinion in financial markets is that the ECB -- like the Fed, the Bank of Japan and the People's Bank of China – has lost its way; its policies are allegedly ineffective and policymakers have no instruments to deal with world's slowing demand, output and employment.
That this view is not based on any plausible empirical evidence does not seem to matter much.
The fact is lost that the Fed single-handedly brought the U.S. economy up from a Great Recession to near full-employment and an average growth rate that is an entire percentage point above its non-inflationary growth potential.
(It is not entirely the Fed's fault that the U.S. growth potential is now down to 1.6 percent from a 1.9 percent average over the last 25 years. Inadequate structural and fiscal policies are mainly responsible for our dismal 0.4 percent growth of labor productivity over the last three years.)
The ECB's job is much more difficult, because it is guiding the economy and a monetary union of politically diverging nation states.
Great Frankfurt bankers
Indeed, despite Germany's constant opposition, the ECB has managed to bring up the euro area's growth rate to 1.6 percent in the third quarter of last year.
That is exactly double the pace of advance in the same quarter of 2014, and almost twice the area's estimated growth potential of 0.9 percent.