I don’t address here a fourth objection, namely that buying government bonds would be conducive to a higher inflation. The ECB has all instruments at hand to retain control of its monetary stance, whether OMTs are activated or not. Let me explain how OMTs address each of these concerns.
They thereby had a negative effect on consumer and investor psychology, contributing to a cycle of pessimism that engulfed the economy. The second reason for the deeper than expected economic contraction was that the Greek economy is relatively closed. In closed economies, any decline in demand hits domesticallyproduced goods more than imports.