The ECB has managed a massive expansion of its balance sheet with long-term refinancing operations. This has been called the equivalent of quantitative easing, as done by the Fed and the Bank of England. This column thus argues that the main obstacle for the ECB is not tight limits on the purchase of government bonds. Rather, it is the absence of a banking and fiscal union and the heterogeneity within the Eurozone that reduces the effectiveness of the ECB instruments.
Jean Pisani-Ferry, Guntram Wolff, Thursday, May 3, 2012
Bernard Delbecque, Wednesday, April 4, 2012
The ECB’s longer-term refinancing operations have been widely analysed. Although comments are largely positive, some experts have argued that direct ECB intervention was the only way to save the Eurozone. This column reviews the criticisms against the operations and assesses whether the ECB should have intervened directly in the sovereign-debt markets instead of providing funding to banks.
Christian Thimann, Friday, March 30, 2012
A recent Vox column argued that with the three-year liquidity operations, the ECB has “hit a limit in its ability to prevent an acceleration of inflation”. This column explains why the ECB’s inflation-fighting powers remain intact – and why the risks of a sudden inflationary spike remain low.
Aaron Tornell, Frank Westermann, Wednesday, March 28, 2012
“Should the inflation outlook worsen, we would immediately take preventive steps”. So said Mario Draghi, President of the European Central Bank. This column argues that these are brave words given that the ECB has hit a limit in its ability to prevent an acceleration of inflation.
Hans-Werner Sinn, Saturday, March 10, 2012
In February 2012, the Bundesbank had a TARGET claim of €547 billion on the Eurosystem. This column proposes a US-like system of marketable covered treasury bills that could be applied to a yearly settlement of TARGET liabilities.
Willem Buiter, Monday, February 20, 2012
Willem Buiter talks to Viv Davies about Greece and the Eurozone. Buiter believes that Greece’s public debt should be written off, it’s banks recapitalised and that the country be provided with sufficient conditional support to grow its economy. They discuss the LTROs and the risks of loss of control over the aggregate size of the balance sheet and potential national central bank insolvencies. Buiter suggests that now is not the time for self-righteousness amongst European policymakers. The interview was recorded on 17 Feb 2012. [Also read the transcript]
Charles Wyplosz, Monday, February 13, 2012
Spreads on public debts in the Eurozone – with the exception of Greece – are falling hard and fast. This column argues that this is in large part because the ECB is now effectively guaranteeing Eurozone government debts. But it cautions that in doing so, the central bank is taking enormous risks.
Fred Bergsten, Jacob Funk Kirkegaard, Thursday, January 26, 2012
Policy reactions to the Eurozone crisis are seen by many as short-sighted, incoherent, and driven by political expediency. This column disagrees. What we are seeing is a game of chicken among the key political and economic powers in Europe. As the crash looms ever closer, the right deals will be struck and Europe will emerge stronger and with its currency intact.
Morris Goldstein, Wednesday, January 11, 2012
Throughout the European debt soap opera, Europe’s leaders have expressed their willingness to “do whatever it takes” to restore stability and save the euro. This column argues that, too often, policymakers have in fact been “doing whatever it takes” to serve the banks.
Aaron Tornell, Frank Westermann, Tuesday, December 6, 2011
If you thought the Eurozone crisis was coming to an end this week, this column argues that we may barely be reaching the end of Act One.
Charles Wyplosz, Monday, December 5, 2011
This week’s announcements by German Chancellor Angela Merkel and ECB President Mario Draghi that the Eurozone is taking steps towards a closer fiscal union seem to be calming markets and restoring confidence in the decision-making of Eurozone leaders. This column argues, however, that the devil is still in the detail.
Paolo Manasse, Friday, December 2, 2011
Paolo Manasse talks to Viv Davies about Italy and the Eurozone crisis. They discuss the economic and political challenges currently facing Italy, how a eurozone fiscal union might work in practice and the role of eurobonds. Manasse explains the trade-off between addressing sovereign debt in the peripheral economies and establishing broader financial stability across the Eurozone; he maintains that an expansionary ECB monetary policy is an important part of the solution. The interview was recorded on 30 November 2011. [Also read the transcript]
Jacob Funk Kirkegaard, Wednesday, November 30, 2011
The ECB seems to be in the background during this crisis – almost helpless due to Treaty obligations and dogmatic adherence to old monetary theories. This column argues that quite the opposite is true. The ECB is a full-blooded political actor engaging in a strategy aimed at forcing EU political leaders to embrace fiscal rectitude and a quantum leap forward in European integration.
Guido Tabellini, Tuesday, November 29, 2011
Last week’s failed auction of German debt showed that none would be immune from a blow-up of the Eurozone, and that normal central banks act as lenders of last resort to their governments. This column argues that unless the ECB starts to care explicitly about financial stability, the troubles will only get worse.
Paul De Grauwe, Monday, November 28, 2011
The euro has a matter of weeks to save itself, with several institutions now preparing for its collapse. Given this, why does the ECB still refuse to bail out Europe’s heavily indebted countries? This column provides an explanation. It says that the ECB may well be behaving rationally but adds that such behaviour is also foolish – and dangerous.
Dimitri Vayanos, Friday, November 11, 2011
Dimitri Vayanos of the London School of Economics talks to Viv Davies about Greece and the eurozone crisis, and argues that leaving the euro would be a disaster for both Greece and Europe. They discuss the bailout package, the appointment of Lucas Papademos as Prime Minister and the benefits of a coalition government of technocrats. Vayanos maintains that the emphasis for Greece should be on deeper institutional and structural reforms. The interview was recorded on 10 November 2011.
Charles Wyplosz, Friday, November 4, 2011
Greek Prime Minister Papandreou made a stand this week. Even though he was backed down, this column argues that he did the EZ a favour by providing an opportunity to change course. One way or another, a disorderly Greek default is in the cards with its attendant contagion. At that point a real solution is inevitable – one that requires EZ leaders and the ECB to play on the same side with credible rules for all.
Paul De Grauwe, Wednesday, October 26, 2011
The Eurozone crisis plays on to a familiar tune. Finance ministers meet on the weekend only for markets to dismiss their efforts the following Monday. This column argues that Europe’s leaders have lost touch, that the ECB has the firepower but is not prepared to use it, and that the outcome of all this is depressingly clear: Defeat by the financial markets.
Charles Wyplosz, Tuesday, October 25, 2011
A series of policy mistakes have put Europe on the wrong path. This column says that the current plan to enlarge the EFSF and recapitalise banks through markets will fail. The twin crises linking sovereign debts and banking turmoil need to be addressed simultaneously for Europe to avoid economic disaster.
Bernard Delbecque, Monday, October 17, 2011
It is widely recognised that without a firewall around illiquid but solvent Eurozone countries, a loss of confidence in the markets could increase interest rates to levels high enough to make any country insolvent. The aim of this column is to propose a concrete plan to build such a firewall and halt the spread of contagion of the debt crisis to Italy and Spain.