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ECB Limitations in Addressing Eurozone Crisis
November 4, 2011 11:20 am (EST)
- Explainer Video
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CFR’s Benn Steil discusses the ECB’s role and limitations in mitigating the eurozone debt crisis. Steil says European Central Bank President Mario Draghi’s statement that the ECB will not act as a lender of last resort to governments may come back to haunt him. "If the markets are concerned that the ECB will not at least provide a political backstop for the eurozone leadership" he cautions, "that could lead to a total boycott of Spanish and Italian government debt, which could be a catastrophe." However, Steil emphasizes the ECB’s limitations in solving the eurozone crisis. "Although the ECB does have a lot of ammunition in that it can print money, it doesn’t have unlimited ammunition," he says. "The European Central Bank is not a power of its own that can manufacture a solution to this debt crisis. It will take leadership in Europe, it will take contributions, further contributions, from the German taxpayer."
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