However, this has taken it a long way into uncharted – and dangerous – territory. It’s no secret that I am critical of the ECB’s government bond purchase programmes in particular. If Eurosystem central banks buy government bonds issued by countries with poor credit ratings, this will distribute the risks of unsound fiscal policy among all the euro-area states.
Monetary policy thus weakens the principle of individual responsibility and entails redistribution, which is really the prerogative of fiscal policymakers. Such redistribution can only be legitimately authorised by democratically elected parliaments and governments. Thus, the most valuable contribution which monetary policy can make towards overcoming the crisis is safeguarding its credibility and upholding public confidence in the euro.