Business World

Saturday 3 December 2016

ECB must go to the printers to save euro

Published 30/10/2011 | 05:00

LAST week's deal to "save" the euro did everything bar the one thing that might possibly solve the problem.

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Unless the ECB is allowed to operate as a proper central bank and prints however many trillion euro are necessary to force the markets to back off, then the single currency is doomed.

Apart from finally succumbing to the inevitable and sanctioning a 50 per cent write-down on Greek government bonds and setting up a €105bn fund to help recapitalise European banks suffering losses as a result of the Greek debt write-down, last week's deal between European leaders also sees the "leveraging up" of the EFSF, aka the bailout fund, to insure up to €1 trillion of eurozone government debt.

Am I alone in thinking that this is stark raving mad? By converting at least part of the EFSF into a bond insurance fund, the risk is concentrated. If, or more likely when, the bonds of other peripheral eurozone countries are written down, the EFSF will take the first hit.

Why are Europe's leaders tying themselves up in ever more complicated knots when the solution is staring them in the face?

The ECB must be allowed to follow the example of the Bank of England and Fed and print as much money as is required and act as a lender of last resort to eurozone governments. Unless that happens, then the euro is doomed.

Sunday Indo Business

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