The euro zone is on the brink of breaking apart–with dire consequences for all of us–yet this is that rarest of problems, one that you can solve just by throwing money at it, points out James Surowiecki. If the European Central Bank were to commit publicly to backstopping Italian and Spanish debt, by buying as many of their bonds as needed, the worries about default would recede.
What’s the Big Idea?
This would be a dramatic move for the E.C.B. to make, but the classic role of a central bank is precisely to serve as a lender of last resort during financial crises, he points out. But as Spiegel highlights, nothing works in Europe without German Chancellor Angela Merkel, and she isn’t just opposed to euro bonds, she refuses to accept a move by the E. C. B. to buy up the bonds of ailing euro-zone countries on a much larger scale than it has so far.