The effects of the European Central Bank’s monetary tightening will not be evenly distributed across the eurozone – and could jeopardize financial stability in some countries. To avoid this outcome, the ECB must pursue targeted asset purchases.
LONDON – Monetary-policy tightening is coming to Europe. Following in the footsteps of the US Federal Reserve and others, the European Central Bank has announced that it will discontinue its asset-purchase program and raise interest rates this month, in a bid to rein in inflation. But, unless the authorities address the differential effect this has on member states’ financial conditions, the eurozone will experience both a recession and a financial crisis.
LONDON – Monetary-policy tightening is coming to Europe. Following in the footsteps of the US Federal Reserve and others, the European Central Bank has announced that it will discontinue its asset-purchase program and raise interest rates this month, in a bid to rein in inflation. But, unless the authorities address the differential effect this has on member states’ financial conditions, the eurozone will experience both a recession and a financial crisis.