Some will argue that the ECB's head has been so deep in the sand refusing to reduce interest rates when needed that for some member economies the game is all but over. What is happening now is too little and to late in many people's eyes and the European Banking sector needs a total overhaul, which would mean an awful lot of pain before any hope of gain and that is something very few politicians have the stomach for.

Admittedly the ECB has very few tools with which to fix the economy and it's recent decision to lower interest rates to an historic low of 0.25% has left the tool bag lighter than ever. The only option now is to reduce the benchmark interest rate to zero or even into negative rates to stimulate lending which is a possibility some market commentators are speculating over. The preliminary inflation reading for October fell to 0.7%, which is the lowest level in the 17-country currency area for four years, and down from 1.1% in September and well below the target of just below 2%.

Whichever way you look at this it is not a good place to be especially as the European Banks that are soaking up this cheap money from the ECB's Long Term Refinancing Operations (LTRO) are preferring to hang on to it instead of passing it on to businesses in the real economy that desperately need it. If the ECB cuts rates into negative territory with the plan of penalising bank holdings in order to stimulate lending then, banks may simply repay their LTRO borrowings quickly rather than the riskier option of lending to companies where there may be a chance of default.

I'm no economist but It seems clear to me (and as we know hindsight is a wonderful thing) that taking the bitter banking reform pill early in the piece would have been the best medicine. However, the situation is now close to desperate and whilst politicians tell us that the patient is getting better the chart at the end of the bed says the patient's arteries are all but blocked and he is on life support. Without political and fiscal union the 17-country Euro zone looks set to have a near death experience soon or maybe even worse.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.