Is the Euro crisis really over? Ever since ECB president Mario Draghi pledged "to do whatever it takes" to save the single currency, the all-important bond markets have been buying peripheral market government debt, including Irish bonds.

Draghi’s promise had a remarkable impact, one so strong that his words have yet to be fully tested in combat. “Whatever it takes” remains a vague commitment but has been enough to convince speculators to back off betting that the Euro is in danger of imminent break-up.

While the underlying economic situation in Greece, Spain and Italy can hardly be described in positive terms, at least it hasn’t got much worse. Such are the low expectations for these countries, a mere hint of economic stabilisation, even at desperately high levels of unemployment, encourages people – Brussels based politicians mostly – to declare victory in the battle to save the Euro.

Draghi has just celebrated his second anniversary in charge at the ECB. His tenure began with a baptism of fire: in December 2011 he embarked on the first in a series of moves to prop of the failing European banking system. He also quickly reversed the relatively recent rate hikes that had been implemented, bizarrely, by his predecessor.

The fact that the ECB raised interest rates as the European economy was sliding deeper into recession and as its banking system was horribly close to something truly awful has received surprisingly little criticism.

For all the talk about a stabilisation – or even recovery – in the Euro zone economy, the fact is that the region is now flirting with deflation. The latest inflation print of 0.7 per cent is well below the ECB’s own target and means that real interest rates are rising, tightening monetary conditions.

Correspondingly (and just as damaging) the Euro has been strong. The ECB should respond to all of this – hence the speculation that another interest rate cut is in the offing – but, with rates already so low, there is little that it can do, at least in terms of orthodox policy.

Much of the commentary about all of this is often written in tones of incredulity. Analysts look at the policies, observe their outcomes and profess amazement about how inept it all seems. Another interpretation is that it is actually all quite rational, at least from one perspective.

The policy prescription for the European periphery is to deflate back to competitiveness: that’s econospeak for cutting labour costs. The only way that can happen is for high unemployment to bear down on wages. It is the only (allowable) mechanism that works and it only works very slowly.

Given that inflation cannot be allowed to rise in Germany, deflation in aggregate for the Euro zone is the inevitable – and quite deliberate – outcome. That’s key to understanding all of this: it is all totally deliberate. It is understood that it comes at a great human cost and that it still has years to run. But, to repeat, it is the official policy and is working as intended.

So, as our Brussels and Frankfurt based masters congratulate themselves on a job well done, it is pointless to complain about any of this. It is equally pointless to argue that it is totally unsustainable. The hedge funds have been seen off: we hear gleeful comments to the effect that “Anglo-Saxon” speculators never understood the primacy of European politics over economics: Europeans will bear any economic pain to keep the European project on track, to keep the Euro alive (closer to home, we need to give thanks for a rapidly rebounding UK economy).

There is something quite dark about of all of this. Some time ago now, Bernard Connolly famously got fired from his job running the monetary affairs division of the European Commission for writing a book called "The Rotten Heart of Europe: the Dirty War for Europe's Money". The paradoxes and flaws inherent in our monetary system have been obvious for many years. People like Connolly have been correctly warning about them for many years.

The political imperative of keeping the Euro show on the road transcends all other considerations. Speculators need to keep this in mind every time they feel like betting on another crisis.

But, given the human cost of the political imperative, it is impossible not to believe that at least one country will, one day, say enough is enough.

Oddly, given the way the politics are evolving, that country may not be a member of the Euro zone: some time in the next few years the UK will, again, have a referendum on whether or not to stay in the EU. The answer may well be the catalyst that the hedge funds have been looking for.