Bond markets appear relaxed but somebody in Italy is wiring large sums of money abroad. The European Central Bank has cut its eurozone growth forecast to minus 0.5 per cent this year and warned of a glacially-slow recovery in 2014, but refused any fresh stimulus to mitigate the slump.
The bank's governing council held interest rates at 0.75 per cent, though a cut was discussed. The tough stance comes as the eurozone faces a second year of outright contraction, with the jobless rate reaching a record 11.9 per cent.
The ECB's president, Mario Draghi, decried the "tragedy" of mass unemployment but insisted that monetary policy cannot resolve the problem.
He said the "positive contagion" that has swept financial markets over recent months has yet to feed through to the real economy but predicted that growth would pick up later this year.
"He has to sound optimistic and put the best foot forward because that is his job, but we think the ECB will have to cut rates sooner or later, and then move on to quantitative easing," said Marchel Alexandrovich from Jefferies.
The ECB expects inflation to fall to 1.3 per cent next year but the underlying rate is significantly lower given the distorting effects of austerity taxes. Any error would raise the risk of a slow slide into a Japanese-style trap.
"Europe is heading into a deflationary scenario if they don't do anything to boost the money supply," said Lars Christensen from Danske Bank. "This already looks very similar to what happened in Japan in 1996 and 1997."
The Japanese discovered that they were acutely vulnerable to an external shock once inflation had fallen below 1 per cent for a protracted period. In their case the East Asian crash of 1998 tipped them over the edge into a serious crisis.
Eurozone lending to companies has fallen by €100 billion ($158 billion) over the past six months, and small firms are struggling with a severe credit crunch across the Club Med bloc.
Draghi said there were no plans to introduce a variant of the Bank of England's Funding for Lending to channel money where it is most needed.
Critics say the ECB has persistently underestimated the severity of the downturn, and has failed to offset drastic budget cuts with monetary stimulus.
Both levers of policy are set on contraction, with bank deleveraging compounding the effect.
There is a risk that the bank may be caught out again this year. German industrial orders fell 1.9 per cent in January, dashing hopes of German-led rebound.
Christine Lagarde, head of the International Monetary Fund, said it was too early to assume that the worst was over. "Clearly the world economy avoided collapse last year. I am very concerned that, by moving into a semi-complacent mood, people risk a relapse," she told the Irish Times.
The Catholic charity Caritas called for radical change in the eurozone's whole crisis strategy, saying the current course was self-defeating and "putting the very legitimacy of the EU at risk".
It said child poverty had reached dramatic levels in Ireland, Spain, Italy, Portugal and Greece, while deep cuts to welfare had left the most vulnerable stripped of a safety net.
It said the chief victims bore no responsibility for the crisis, a breach of natural justice.
The crisis has engulfed France where a key gauge of the money supply - six-month real M1 - is contracting at an annual rate of 6.6 per cent and flashing graver warning signs than in Italy or Spain.
Figures showed that French unemployment rose to a euro-era high of 10.6 per cent in the fourth quarter, with the total looking for work near 3.7 million.
France's BVA confidence index plunged 12 points last month. Some 75 per cent of households fear that the economy will deteriorate over the next year.
It is the worst reading since President Francois Hollande took power in May with a pledge to kick-start growth and break the back of unemployment.
The Figaro said the French jobless rate was now higher than at any time in the 1930s, when farm ties and the empire acted as a safety valve.
"France is on the brink [of] economic implosion," said economist Christian Saint Etienne, warning that a state sector nearing 57 per cent of GDP rendered the country unfit for economic and monetary union.
Draghi deflected questions over Italy's political crisis, leaving it unclear whether the ECB can back-stop the bonds of a country with no functioning government and no likelihood of complying with the rescue conditions. About 57 per cent of Italians voted for an end to the EU-imposed cuts.
Pier Luigi Bersani, the most likely premier, has vowed to rip up austerity plans and push for growth. The ECB bond purchases - known as the OMT - require activation of the eurozone bail-out fund and a vote in the German Bundestag. "The rules are what they are. The ball is entirely in the government's hands," he said.
Comedian Beppe Grillo has stepped up his firebrand rhetoric, warning of "violence on the streets" if his Five Star Movement fails to deliver civic revolution.
Grillo said he had not decided whether Italy should leave the euro.
"I want correct information. I want a plan B for survival for the next 10 years. And then, with a referendum we'll decide."
The latest "Target2" data from the ECB shows that the country saw capital flight of €34 billion to the rest of the eurozone in February, the biggest outflow for a year. The Bank of Italy has built up settlement liabilities of €256 billion.
Bond markets appear relaxed but somebody in Italy is wiring large sums of money abroad.