The ECB’s lack of credibility could hamstring Europe’s recovery
A strong currency is both cause and consequence of the ECB’s failures
AT POINTS IN the past decade the European Central Bank (ECB) was the only institution standing between the euro zone and financial oblivion. Europe’s problem was budgetary inhibition and insufficient risk-sharing. Monetary policymakers were the only game in town. No longer. Earlier this year the European Union agreed to issue joint debt to fund a fiscal response to the pandemic, sending confidence in the currency union surging. Now the most pressing problem in euro-zone economic policy stems from Frankfurt. It is that hardly anyone believes the ECB is serious about hitting its inflation target of “below, but close to, 2%”.
This article appeared in the Leaders section of the print edition under the headline “Off target”
From the September 19th 2020 edition
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