Equalization of Risk Premiums through the ECB

Dirk Meyer ()
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Dirk Meyer: Helmut-Schmidt-Universität

Chapter Chapter 5 in European Union and Monetary Union in Permanent Crisis I, 2022, pp 79-95 from Springer

Abstract: Abstract The European Central Bank’s (ECB) monetary crisis policy has led to low and negative interest rates. Not only the exceptionally low interest rate level, but also the risk premiums equalized as part of the monetary crisis policy cause, in addition to a capital misdirection into the crisis countries, a significant implicit income transfer from the creditor countries. The debt trap of low interest rates tempts public budgets of the crisis countries to increased indebtedness, which becomes a problem at the latest when interest rates rise. In addition, the ECB has obviously taken over the function as lender of last resort (LoR) for banks and member states.

Date: 2022
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DOI: 10.1007/978-3-658-38643-6_5

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