Germany has surrendered and the euro is saved. That seems to be the markets’ interpretation of last week’s ruling by the German constitutional court on the European Central Bank’s “whatever it takes” policy to save the single currency. The judges’ ruling essentially boiled down to this: “We don’t like what the ECB is doing. We think it illegal. But only the European Court of Justice can strike it down.”

Since the European Court is highly unlikely to accept this invitation, the ECB will be able to preserve its policy of Outright Monetary Transactions – essentially a promise to be the buyer of last resort for the bonds issued by eurozone countries. Had the German courts struck down the ECB’s policy last week you would have seen chaos on the markets. Instead, calm prevailed.

The ECB’s initial announcement of its bond-buying policy in mid-2012 was, without doubt, a turning point in the euro crisis – preventing the borrowing costs of Italy and Spain from soaring to unbearable levels. Now the ECB may be tempted to go even further. With the threat of deflation haunting Europe, the bank is under pressure to launch a European version of quantitative easing, imitating the US, Japanese and British authorities. Mario Draghi, the ECB president, wary of the reaction in Germany, has hitherto suggested that such a policy would be illegal. But now that he knows the German courts are likely to refer any such decision to the more integrationist ECJ, he may decide to be a bit bolder.