How can the ECB deal with the risk of fragmentation?
The ECB is preparing a new programme to limit divergences in borrowing costs within the euro area. This Policy Insights paper argues that this so-called ‘anti-fragmentation’ tool needs to be seen in conjunction with the existing tool, namely the Outright Monetary Transactions (OMT), created by the ECB under Mario Draghi in 2012 and widely credited […]
The ECB’s normalisation path
The ECB has fallen behind the curve over the last few months as it has stuck to an extremely expansionary stance based on model predictions that inflation would return to slightly below its 2% target within two years. The real problem is thus the nature of this approach, which can justify endless procrastination. In this […]
On selling sovereigns held by the ECB to the ESM
A repetition of austerity policies of the early 2010s is not consistent with maintaining adequate growth and sovereign debt sustainability in the post-pandemic environment, argue the authors of this CEPS Policy Insight. Likewise, a debt restructuring process with deep haircuts will just upset the fragile state of the markets and create a run on the […]
What can the ECB achieve in a lockdown recession?
The honest answer is, very little. The economy of the euro area might well chalk up another quarter of negative growth in Q1 2021 as governments are prolonging social distancing measures due to the continuing winter wave and the slow pace of vaccination. While the euro area economy remains weak, the US economy is poised […]