The EZ crisis is approaching a tipping point beyond which market panic and slow government reaction threaten to create a generation-defining loss of jobs, savings, and pensions. This open letter to the president of the German central bank presents arguments that counter German objections to using the Eurozone’s last remaining defence against economic calamity – the ECB.
A growing number of competent economists have come to the conclusion that the debt crisis will not come to an end until the ECB intervenes as lender of last resort. You have taken the opposite view. The question, for me, is why?
As I see it, your objection rests on three points:
- Legality of bailouts;
- moral hazard; and
These are important issues, but the answer cannot be simply: “No, never.”
- independence of the ECB.