Financial Times
December 13, 2011
The discussion of the European crisis and the appropriate policy responses have gone off track. We all agree that governments need to address the long-term issue of sustainability of the eurozone, and work is in progress to that effect. But what about the short-term crisis management?
Some call for the European Central Bank to take out the bazooka and announce its unlimited use to bring down sovereign spreads. Chancellor Angela Merkel and President Nicolas Sarkozy seemed to give the green light for a more aggressive approach by the ECB by expressing confidence that the ECB will do what it has to to calm markets, and by promising not to comment on specific actions taken by the ECB. However, the ECB points to the treaty which prohibits direct financing of member states, or privileged access to the ECB, and it notes, therefore, that anything resembling quantitative easing would have to be undertaken simultaneously for all member states in proportion to size; an approach hardly called for.
As the pressure on the ECB has built up in recent months, its president Mario Draghi felt obliged last week to state that the ECB will act only within its legal mandate and that it will obey the spirit of the treaty.
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