Mario Draghi may have saved the eurozone not once, but twice.
Mario Draghi’s 2012 commitment to do “whatever it takes” to preserve the single currency, is backed by a credible threat. But at a national level, no country in the eurozone is monetarily sovereign.
Mr Draghi has created something novel — a “contingent safe asset” if you will.
If you comply with the fiscal rules in the eurozone, you are eligible for bond-buying programmes carried out by the ECB, and are therefore as good as credit risk-free.
The eurozone now has a mechanism to deal with fiscal freeriding and has clear conditions for the creation of safe assets.
Mr Draghi has created something novel — a “contingent safe asset” if you will.
If you comply with the fiscal rules in the eurozone, you are eligible for bond-buying programmes carried out by the ECB, and are therefore as good as credit risk-free.
The eurozone now has a mechanism to deal with fiscal freeriding and has clear conditions for the creation of safe assets.
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