However, the longer the phase of low interest rates continues, the blunter the loose monetary policy instrument becomes; risks to financial stability increase and the exit becomes more difficult. The Eurosystem also intervened in the government bond markets, however, and raised the prospect of further interventions subject to certain conditions. You will be aware that I take a critical view of these steps.
For by purchasing government bonds of countries that are finding it difficult to place their bonds in the market, central banks are redistributing the burden of unsound fiscal policy throughout the euro area. Ultimately, this is tantamount to mutualising liability for the individual countries’ debts via the central bank.