Paul de Grauwe
By this expert
Fiscal implications of the ECB’s bond-buying program
The monetary-fiscal policy connection is under scrutiny by the German Constitutional Court in the context of the ECB’s OMT bond-buying programme. This column argues that most analyses are deeply flawed by the misapplication of private-company default principles to the central bank. ECB bond-buying transforms public bonds into monetary base, and sovereign-default risk into inflation risk. The real question is: What is the non-inflationary limit to money-base expansion? This depends upon the economic situation and is much higher in the current liquidity-trap setting.
The ECB Can Save the Euro – But It Has To Change Its Business Model
Paul De Grauwe raises very important questions on the institutional structure of Europe and how it must be modified to fortify the euro zone.