Concluding remarks Ladies and gentlemen You can look at it from any angle, and you can’t avoid one fact. Sovereign default risks cannot be eradicated by packaging sovereign bonds or by splitting up bonds into safe and less safe tranches. Safe opportunities for investment can only be created by the member states themselves by ensuring sound public budgets.
First, the central bank should be given legally-backed formal autonomy. Second, in a situation where inflation dynamics are more often dictated by supply side elements, the central bank’s ability to control inflation is restricted. An MPC mechanism in such a situation can weaken the coordination between the Government and the Reserve Bank.