A Second Chance for European Reform
The ECB has calmed the markets with its promise of unlimited purchases of eurozone government bonds, because it effectively assured bondholders that taxpayers and pensioners in the eurozone’s still-sound economies would, if necessary, repay them. This respite offers an ideal opportunity to push forward with reforms.
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MUNICH – The European Central Bank has managed to calm the markets with its promise of unlimited purchases of eurozone government bonds, because it effectively assured bondholders that the taxpayers and pensioners of the eurozone’s still-sound economies would, if necessary, shoulder the repayment burden. Although the ECB left open how this would be carried out, its commitment whetted investors’ appetite, reduced interest-rate spreads in the eurozone, and made it possible to reduce the funding of crisis-stricken economies through the printing press (Target credit).