It looks that the ECB is finally, by a
circuitous route, doing what needs to be done. It remains to be seen whether it will do enough, but the combination of nearly half a trillion euros - in one day - in cheap loans to banks, with the acceptance of troubled sovereign debt as collateral, is a step in the right direction. The direction, that is, of acting as a lender of last resort, despite German protestations.
This is a smart move by Mario Draghi, who
talked tough on bail-outs, then effectively ate his words, but did so in such a way as to leave most German voters unsure as to what has really happened.
Anyway, this is just a start. The austerity medicine will still depress Southern European economies, and monetizing slices of their debt just as we approach the abyss is not exactly going to resolve the problem.
