Only a more active ECB can solve the euro crisis

Paul De Grauwe

CEPS Papers from Centre for European Policy Studies

Abstract: This paper asserts that the contagion currently afflicting sovereign bond markets in the eurozone can only be stopped if there is a central bank willing to be lender of last resort, i.e. willing to guarantee that the cash will always be available to pay out the bondholders. Until recently, the European Central Bank performed this role either directly by buying government bonds, or indirectly by accepting government bonds as collateral in its liquidity provision to the banking system, but it has made it clear that it is now unwilling to continue to do so. The author argues that this reluctance of the ECB to take up its responsibility as a lender of last resort is the single most important factor explaining why the forces of contagion in the eurozone’s sovereign bond markets have not been stopped.

Pages: 8 pages
Date: 2011-08
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.ceps.eu/system/files/book/2011/08/CEPS% ... 20on%20the%20ECB.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ceps.eu/system/files/book/2011/08/CEPS%20PB%20No%20250%20PDG%20on%20the%20ECB.pdf [301 Moved Permanently]--> https://www.ceps.eu/system/files/book/2011/08/CEPS%20PB%20No%20250%20PDG%20on%20the%20ECB.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eps:cepswp:5963

Access Statistics for this paper

More papers in CEPS Papers from Centre for European Policy Studies Contact information at EDIRC.
Bibliographic data for series maintained by Margarita Minkova ().