Mario Draghi’s version of QE for Europe has one major flaw

Surprisingly, Mario Draghi seemed a little grouchy Thursday.

After all, he just delivered a bigger-than-expected program of European Central Bank bond purchases but everybody wanted to talk about “risk sharing.”

Such is life at the helm of the ECB. While the institution, particularly under Draghi’s tenure, has been held up as the one great hope for the survival of the euro because it can act even as national governments dither, the fact is that the central bank isn’t immune to the shared currency project’s political flaws.

Here’s a rundown of the situation: Draghi announced that the ECB, in March, will begin monthly purchases of 60 billion euros ($69 billion) of assets, including eurozone government bonds. Those purchases are set to run at least through September 2016 (for a total of around €1.1 trillion), but the plan is effectively open ended in that the ECB said they would continue until inflation is back on the path toward the central bank’s target of just below 2%.

Markets cheered, with the yield spread between peripheral and core eurozone bonds narrowing, the euro dropping, and stocks rallying. Draghi managed to outperform sky-high expectations and avoid disappointing investors.

But worries remain. The problem is that, unlike the Fed or other big central banks that have embarked on quantitative easing, the ECB remains handcuffed by the fragmented nature of the eurozone.

As a result, there’s less to the ECB’s version of QE than meets the eye. The big rub is that only 20% of the purchases will be subject to “risk-sharing.” That means national central banks will be responsible for 80% of the losses on bond purchases. That caveat wasn’t unexpected. It is seen as a peace offering of sorts to Germany, which hates the idea of QE and fears the program will amount to a backdoor mutualization of eurozone debts.