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Only a more active ECB can solve the euro crisis. CEPS Policy Brief No. 250, August 2011

De Grauwe., Paul (2011) Only a more active ECB can solve the euro crisis. CEPS Policy Brief No. 250, August 2011. [Policy Paper]

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    Abstract

    This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central Bank performed this role either directly by buying government bonds, or indirectly by accepting government bonds as collateral in its liquidity provision to the banking system, but it has made it clear that it is now unwilling to continue to do so. The author argues that this reluctance of the ECB to take up its responsibility as a lender of last resort is the single most important factor explaining why the forces of contagion in the eurozone’s sovereign bond markets have not been stopped.

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    Item Type: Policy Paper
    Subjects for non-EU documents: EU policies and themes > EU institutions & developments > European Central Bank
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on and consequences/reforms
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Policy Briefs
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 04 Aug 2011 14:22
    Number of Pages: 8
    Last Modified: 04 Aug 2011 14:22
    URI: http://aei.pitt.edu/id/eprint/32246

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