Taking aim at the inaction of the European Central Bank in this whole mess, The New Yorker’s James Surowiecki follows a similar line of reason to our earlier posts on the inaction of Merkel and the Southern economies, citing a clear and effective solution and an unwillingness to go there for fear of rewarding bad behavior:
The frustrating thing about all this is that there is a ready-made solution. If the European Central Bank were to commit publicly to backstopping Italian and Spanish debt, by buying as many of their bonds as needed, the worries about default would recede and interest rates would fall.
So the problem is not that the E.C.B. can’t act but that it won’t. The obstacles are ideological and, you might say, psychological…… Moral hazard is a reasonable concern, but the Germans have reaped enormous benefits from the euro—most notably, it made their exports cheaper for the rest of the continent—and they should be willing to bear some of the costs.