Europe's 'doom-loop' returns as credit markets seize up

"The doom-loop is rearing its ugly head again," he said, referring to the vicious cycle in 2011 and 2012 when eurozone banks and states engulfed in each other in a destructive vortex.''

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[The ECB] cannot usefully cut interest rates any deeper into negative territory since the current level of -0.3pc is already burning up the "net interest margin' of lenders and eroding bank profits. "How much further can the ECB go before it becomes outright harmful?" he asked.

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Mr Guglielmi said the mood is starting to feel like the panic in the summer of 2012, just before Mario Draghi vowed to do "whatever it takes" to save the euro -- a shift made possible when Berlin lifted its veto on emergency action to backstop Italian and Spanish bonds.

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Mr Draghi is running out of tricks for an encore but there is still scope for "QE2" at the next ECB meeting in March, if he can secure German acquiescence.

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"We all know that QE2 is not really going to work but the feeling in the market is ‘I'm a smoker, I know it kills me, but so long as I can get cigarettes, I'm happy,'" he said.