“It started in Germany…”

Bugger the Bundesbank — that seems to be ECB President Jean-Claude Trichet’s current raison d’être. The ECB, together with other global central banks, yesterday agreed to provide dollar funding to ease the mounting liquidity crisis in European banks, largely caused by American banks curtailing interbank lending in anticipation of another crisis. This unorthodox action runs contrary to the wishes of the German Bundesbank, adding to the pre-existing strain between the ECB and the German establishment over bond purchasing, tension that was epitomised by the resignation of Jurgen Stark last weekend.

Obviously, central banks do not take this action every day and it is yet another indication that crisis is now impending. European finance ministers are meeting today and it remains to be seen if they can offer anything other than the words that have become Angela Merkel’s staple. The word is that no long-term solutions are being discussed and, of course, numerous existing measures remain unimplemented. So it’s no surprise that central banks feel the need to take action, but this crisis will not be resolved by interim measures alone. US Treasury Secretary Tim Geithner will make this point when he attends the conference.

A dark mood pervades Westminster. George Osborne warns that the UK is at risk from the Eurozone crisis, as did Ken Clarke on Newsnight last night. It was a noteworthy appearance in which the former chancellor said:

“The thing that I take from this crisis is that the political leadership in the United States and in large parts of Western Europe has been totally overwhelmed by the dimension of this financial crisis. You have paralysis in Washington and paralysis in large parts of Europe because they’re incapable of agreeing and everyone’s fighting short-term politics. I think that we in Britain don’t out too badly by that comparison. We’re doing the right things, but our fate partly depends on how those people sort it out.”

Clarke is the latest coalition minister to concede that the economic outlook is increasingly grim. It’s also notable that Clarke is keen to blame the Germans and the Americans. Maybe the voters will agree with him if disaster strikes. After all, they almost believed the last man who said, “It started in America”.