Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Not a bad comment from Sky News: Super Mario Can't Save The Euro On His Own
If it were to copy the Bank of England, it would be duty-bound to buy up government debt from all the euro states in proportional quantities. As the think tank Open Europe has argued today, this would mean that "even a €500bn bout of QE - as some have called for - would see only €90bn flow towards Italy, due to the need to spread QE evenly across the eurozone. This would not make a significant dent in Italy's €1.9 trillion of sovereign debt."

This, in essence, is why it all comes back to politics in the end. What is needed to save the euro is a transfer of wealth from the north to the south. This can be done fiscally - in other words through a bail-out fund into which Germany et al put comparatively more cash. It can be done monetarily - by the European Central Bank specifically buying the debt of the most troubled euro members and/or provoking enough inflation to erode German living standards and counteract Greek deflation. But either of these methods is a transfer of living standards all the same, and so ought to be decided by (preferably elected) politicians rather than central bankers.

It is hard to see why the market would be convinced by any solution which didn't have this kind of certainty. And as Mario Draghi's comments today underline, so far what we have is a kind of hodge-podge of half-measures which look a little like quantitative easing but without any of the necessary firepower to take on such a seminal crisis.



tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Mon Dec 19th, 2011 at 11:01:30 AM EST
[ Parent ]

Others have rated this comment as follows:

Display:

Occasional Series