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Paul de Grauwe

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Fiscal implications of the ECB’s bond-buying program

Article | Jun 14, 2015

The monetary-fiscal policy connection is under scrutiny by the German Constitutional Court in the context of the ECB’s OMT bond-buying programme. This column argues that most analyses are deeply flawed by the misapplication of private-company default principles to the central bank. ECB bond-buying transforms public bonds into monetary base, and sovereign-default risk into inflation risk. The real question is: What is the non-inflationary limit to money-base expansion? This depends upon the economic situation and is much higher in the current liquidity-trap setting.

The ECB Can Save the Euro – But It Has To Change Its Business Model

Article | Jul 29, 2012

Paul De Grauwe raises very important questions on the institutional structure of Europe and how it must be modified to fortify the euro zone.