Gros, D. & Kopf, C. (2015) “Quantitative easing in euro zone requires shared risk“, Centre for European Policy Studies: Economic Policy, Researchers’ work published externally, 21 January.
In their column published online by Reuters, Daniel Gros and Christian Kopf offer their assessment of the programme of sovereign bond purchases to be undertaken shortly by the European Central Bank in the euro area. They examine in particular the accounting technique proposed in order to immunise the shareholders of the ECB, namely the national central banks, against potential losses from such operations in which purchases would not be undertaken jointly, but rather would be made on the accounts of individual national central banks of the Eurosystem.
They find this proposal is fundamentally flawed and gives false comfort. In their view, leaving government bond purchases on the balance sheets of national central banks would not prevent cross-country loss-sharing in the event of another sovereign default in the euro area. On the contrary, they warn that it could even increase the probability of such an accident happening again.
Relevant posts:
- De Grauwe, P. & Ji, Y. (2015) “Quantitative easing in the Eurozone: It’s possible without fiscal transfers“, VoxEU Organisation, 15 January.
- Muellbauer, J. (2014) “Combatting Eurozone deflation: QE for the people“, VoxEU Organisation, 23 December.
- Durden, T. (2014) “The Eurozone’s QE Problem“, ΘZeroHedge, 19 November.