If I read my Twitter feed correctly, Jorg Asmussen, the German representative on the European Central Bank’s executive board, thinks that the ECB has already played its part as far as saving the euro is concerned with last December’s LTRO intervention; it’s now up to national governments to complete the process, he says, by undertaking the necessary structural reform (Mr Asmussen has been speaking at the Institute for New Economic Thinking conference in Berlin).
As is becoming ever more common when it comes to euroland, it’s a view which is quite at odds with the facts. True enough, the ECB’s surprise liquidity operation did succeed in dousing the crisis, at least temporarily. A Lehman’s style meltdown was averted. But the idea that the ECB can now sit back and let the politicians do the rest is surely deluded.
One of the comments says it all:
[blockquote] “Jeremy tells us “For the good of the whole, it’s right that the ECB should be inducing a boom in Germany.”
It seems to have entirely escaped his notice that despite massive money printing by the Fed, BoE, JCB and the ECB, not one of them has managed to induce a “boom” in their respective economies.” [/blockquote]
What the money printing has done however is load up a lot of potential for inflation in the not-too-distant-future.
Anyway, I suspect Europe has already indicated which strategy it intends to stick with: Greece had some austerity imposed on it, but its creditors were invited to accept a 70% reduction in value of their loan asset, or nothing. They took the haircut, and they will do it again in future if ECB and EU decides they should. From EU’s point of view, its better than revolution.