Before the euro zone, individual countries issued bonds in their local currency and could print more of it, whether it be francs, lire or drachmas, if a crisis was making it difficult to pay off the loans.<\/p>\n
Today, with the European Central Bank in charge of euros, governments in Athens, Rome and elsewhere no longer control the \u201cprinting press.\u201d\u009d Yet even as individual governments lost the power to pay off debts by printing money, the politics and regulations of the euro zone encouraged banks, insurance companies and other financial firms to load up on government bonds \u201d\u201d and countries to issue them.<\/p>\n
The \u201cpersistence in sustaining risk-free status .\u201d\u2030.\u201d\u2030. has, in our view, directly contributed to the development and severity of recent market turmoil,\u201d\u009d Achim Kassow, a member of the board of managing directors of Germany\u2019s Commerzbank, wrote in a recent study of the bank rule for the European Parliament. \u201cBoth the course and the severity of the crisis can clearly be tied to incentives set by current regulation.\u201d\u009d<\/p>\n