The ECB schism
You might think that enough has already been written about dealing with deflation and unconventional monetary policy tools. But apparently not enough to settle the question of whether the European Central Bank should in fact further cut interest rates and shift to quantitative easing i.e. outright purchases of debt. This Bloomberg story puts names on who is arguing for what, with an extended Hellenic phalanx (George Provopoulos, Athanasios Orphanides and Lucas Papademos) pushing for quantitative easing but the Bundesbank’s Axel Weber arguing that the ECB is already near its limits on any type of loosening.
The latest Eurostat inflation data might concentrate minds, showing annual Eurozone inflation of 0.6% and several countries already in deflation. But if the cautious EU countries thought that the G20 enhancements to the IMF would bail out them out any further anti-crisis measures, that money to eastern Europe needs to start flowing soon. Note: the only big announcement since the G20 is the facility for Poland, and that’s a precautionary facility. The ECB can’t dodge this issue forever."