The European Central Bank: a hamstrung firefighter

Valentina Pop, EUobserver, 30.07.2012

Link to original article


It is called the 'Eurotower' - a 40-storey-high skyscraper in the financial district of Frankfurt - Germany's equivalent of the City of London.

Yet it is not big enough to house the roughly 1,400 employees of the European Central Bank (ECB) preparing the decisions that will make or break the euro - ranging from interest-rate setting to buying bonds or issuing cheap loans to banks. […]

And what the ECB cannot solve is the core issue of having to steer one monetary policy for 17 different economies which are growing further apart.

"Some need cheap money, some need less. This is the fundamental problem, the euro did not succeed in bringing the economies closer together. Instead we see more divergence," says Janis Emmanouilidis from the Brussels-based European Policy Centre, a think tank.

"But the ECB alone cannot address that."

And so it all comes back to the democracy issue. Is the euro worth giving up sovereignty, Germans paying for more bailouts, Spaniards and Greeks stomaching more austerity?

"We have to come to this point where we address this question. Explain what it means if it all collapsed, the Deutsche Mark would explode and hurt exports, for instance," Emmanouilidis said.

The German-Greek national is still hopeful that the "reflex" of struggling to make the European project and the common currency work will prevent countries from falling back in the trap of nationalism which caused two world wars in the last century.

"But the general feeling at the moment is that at the top level they are not 100 percent sure it will work and they are willing to go all the way. And everyone, including markets, see that. So it becomes a self-fulfilling prophecy," he said.

For the entire article see here


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