狂热分子 豆瓣:The ECB, eternal and infinite (3)

That then raises the next question: even if the ECB’s strategy makes sense economically, does it make sense politically? In its willingness to lend to banks without limit (to be sure, against collateral), but not to sovereigns, the banks’ ultimate guarantors, the ECB has rejected the more effective solution in favour of the more legal one. It is a bit like someone who won’t lend to a deadbeat father but will lend to his teenaged son. Ultimately, if the father can't pay his bills, neither can the son.

Here again, the ECB may have been underestimated. While it believes politicians have certainly made matters worse, first in their initial insistence (since recanted) on private-sector haircuts and regulatory pressure on banks to deleverage, the ECB still believes the ultimate solution is political: the commitment by sovereign governments to fiscal balance. One of the more interesting things I heard in Europe was the assessment by a French observer that the problem today is France, not Germany: it continues to hold out for monetary union while surrendering as little sovereignty as possible, a position incompatible with a successful fiscal compact. If the ECB bent to France's wishes and became a more aggressive buyer of sovereign debt, it would simply let French (and other) politicians escape the tough decisions necessary for fiscal balance to work. It would bring near-term relief but no lasting solution.

I’m a bit more sympathetic to the ECB’s strategy than I used to be, but still not convinced it will work. Even with the threat of economic collapse at their doorsteps, European leaders still seem incapable of unified, decisive action. As our leader this week argues, the new fiscal compact makes no provision for Eurobonds or any other form of joint funding of member state debts and dwells too much on austerity and not enough on growth. The longer Europe muddles through, the more banks’ demands on the ECB will grow. Even if the ECB can, legally, become the sole source of funding for peripheral euro-zone banks, is that sustainable politically? At some point won’t the leaders realise that lacking all private-sector confidence, their banks can no longer finance a growing economy? At that point, they will conclude the euro is not sustainable and prepare to exit, and the ECB’s limits will have been reached.