Institute for Research in Economic and Fiscal issues

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ECB and quantitative easing

Will the European Central Bank turn to Quantitative Easing ? This is the question haunting all analysts and governments and, if one were to make a bet, better put it on the YES answer. Yes, the ECB will most probably end up doing just what the FED has been doing for years. The main reasons put forward in support of that policy is that there is no much choice: no one wants to lend to EU states and EU banks any more, not even the Chinese government, and the German economy doesn’t have the power to support everyone.

Also, according to many analysts, Quantitative Easing, although it will revived inflationary pressures and remind us of episodes many would like to forget, is seen as being much less risky than letting the Eurozone split. The irony is that, if you remember, the Euro was supposed to bring about a much safer and more prosperous world. And it is often the same analysts that pushed our governments into the euro-dream that are now telling us what is the safest policy. So, if the ECB will most likely turn to Quantitative Easing there is still to believe that it shouldn’t.

For a slightly different point of view, see this recent analysis from John H. Maskin at the AEI: "How Did Europe’s Debt Crisis Get So Bad"

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