Further to my reporting at the weekend that Draghi’s QE plans will in effect hand control, and liability, to the individual central banks
Here’s a piece by BBC economics editor Robert Peston that suggests those ECB plans may well start unravelling monetary union and concludes
The point is that – according to economic theory – monetary union can only really work in the long term if its risks and rewards are shared federal risks and rewards, not national ones.
So if it emerges that Draghi was only able to secure agreement for QE by devolving its operation to the national central banks, in an attempt to reassure German taxpayers that they are not in any way taking financial risks to support governments other than their own, then many would see that as highly retrograde – a de facto unravelling of monetary union.
As it happens, it would also be a fairly pointless and futile gesture to German taxpayers, in the sense that if the worst happened – which is that it looked as though a country like Italy would default on its debts – Germany could never be insulated from the huge losses, even if the Italian bonds were owned by the Italian central bank rather than the European Central Bank.
In the case where an Italy or a Spain or (more topically) a Greece were about to renege on what it owed, Germany would either have to stand by when the country left the euro (which would produce eye-watering costs for other eurozone members) or bail that country out.
Or to put it another way, Germany is in an “all for one, one for all” monetary union, even if at times it would like to pretend not to be.
More food for thought as the debate continues