This is not just about the Eurosystem’s government bond purchases, which are blurring the boundaries between monetary and fiscal policy. Central banks are becoming the largest creditors of the member states. This could lead to a situation where monetary policy becomes harnessed to fiscal policy and is pressured to make high levels of debt sustainable through low interest rates.
All the more so given that the low-interest-rate environment offers no incentive for governments to consolidate their public finances. Fiscal policy in the euro area has been loosened again noticeably over the past few years. What governments are saving in interest payments isn’t being put towards the urgent goal of reducing debt, but spent for the most part.