ECB faces terrible problem -- Greenspan
FORMER Federal Reserve chairman Alan Greenspan said the European Central Bank (ECB) faces a "terrible problem" because its measures to combat the debt crisis make it easier for countries to defer cutting budget deficits.
"I think they've got a terrible problem," he said in an interview with CNBC in Washington.
"To the extent that they increase their purchases of bonds of the various different countries, they of necessity take the pressure off the political system within those countries to do what has to be done."
While the ECB yesterday delayed withdrawing emergency liquidity measures and bought more government bonds, president Jean-Claude Trichet said governments should take the lead in quelling the region's deficit crisis.
Bond yields of Spain and Portugal have soared on investor concern that they may follow Ireland and Greece and seek aid, increasing the risk that the ECB may have to do more if politicians don't deliver. (Bloomberg)