Wednesday, February 1, 2012

An Asymmetric Eurozone Policy Shock

“The ECB set rates too low over much of the last decade to help Germany out of slump, setting off credit booms that destabilized half of Europe. The favour was not returned in mid-2011 when the Trichet-Stark team raised rates even though real M1 deposits were collapsing across Club Med, with consequences that are now painfully apparent.”

Yet another sign of the return of the “national motive” in European politics.

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