Indeed, the ECB concluded –unlike the FED and the Bank of England– that the best way of confronting the crisis was to impose negative rates on deposits and to repurchase government debt until yields also become negative. In making this decision the ECB copied the Bank of Japan and the National Bank of Switzerland’s policies; however, these economies are much smaller and, unlike the Euro, have a strong safe haven bias, and, therefore need to discourage foreign investments in local debt, which is exactly the opposite of what Europe needs.
However, the Draghi-ECB experiment has clearly backfired: Banks have become more conservative, less profitable and worse monetary flow transmitters; growth stimulus in the EU has been negligible, and private investors find investing outside the EU much more attractive than investing within its borders. The fact is that the ECB policy actually encourages European Governments to issue more debt: they will now improve fiscal deficit by increasing debt, and they’ll get paid for it, too!! It is a wicked incentive that breaks the discipline achieved when monetary policy making was taken away from regional politicians, who were no longer permitted to devaluate their currency on a whim, and were –de facto– forced to control deficit levels and make the necessary reforms to remove constraints from the economic and labor markets and encourage a devaluation-free growth.
The ECB is now levying a wealth tax on the major savings cushions, that could very well be the stabilizing factor of the economy going forward (pension funds, corporate treasury, money market funds, bank deposits) and this, far from increasing investments in Europe, is directing them to the USD and to US companies, not subject to such heavy fiscal burdens. Furthermore, higher labor flexibility and lower linguistic and regulatory complexity make US companies doubly attractive when compared to their European peers.
In conclusion, in the long term, hold long positions in USA vs. Europe and stay long USD vs. EUR. In the meantime, sell German short and long term debt to cash the “wealth tax” and pocket the negative interest rates markets are willing to pay.