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How should the ECB enact Quantitative Easing? A proposal

Varoufakis, Y. (2014) “How should the ECB enact Quantitative Easing? A proposal“, Thoughts for the post-2008 World Blog, 19 May.


The ECB has no alternative to enacting some form of Quantitative Easing (QE) in order to prevent deflationary expectations from setting in fully. Core inflation has already reached a level that, even according to Mr Draghi’s own pronouncements on 24th April, should have already triggered off QE. However, the ECB’s governing board is finding it hard to agree on what assets the ECB ought to buy. In this post I suggest a simple answer to this debilitating question.

When the Bank of England contemplated QE, there was never an issue of what it ought to purchase: UK bonds and various assets belonging to UK based banks. Similarly with the Fed: US Treasuries and an assortment of debt instruments owned by Wall Street. But the ECB?

There are two issues the ECB faces: (1) The operational/legal problem, and (2) the macroeconomic concern.


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