Another line of argument that was put forward in favour of foreign currency sovereign borrowings was that the government’s borrowing abroad would help develop a benchmark for the private sector foreign currency debt. However, now weightage for sovereign risk is assigned to a private sector debt even without the sovereign benchmark, after taking into account the sovereign risks.
What about the risk of the ECB itself incurring losses as a result of the new government bond programme? That’s another problem. One of the principles of our monetary policy is that our transactions should entail the least risk possible. Yet the Eurosystem will take on substantial risks by making these purchases.