The job of a normal central bank faced with this situation is to be the lender of last resort. But ECB...

But the ECB was deliberately constructed to be different from normal central banks. 

 One of the most striking moments in the euro crisis saga was when European elites forced Silvio Berlusconi to leave office in favour of unelected Mario Monti. This was possible because Italy is a member of the euro area, and is therefore uniquely vulnerable to capital flight and bank runs.

 Spaniards have good reason to hold euros in bank deposits and euro-denominated bonds as their safe asset, but have literally no reason to hold Spanish bank deposits or Spanish government bonds. 

 At any moment, euro-area creditors could decide they no longer wish to finance a country’s banks and its government.

 This arrangement is inherently unstable.

 Matthew C Klein, FT Alphaville 9 November 2017



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