Ever since May 2010, when the European Central Bank began bailing out Greece, the continent’s leaders have sought to reassure markets that such help was a one-off measure. But there is nothing as permanent as a temporary solution. The aftershocks of the financial crash meant that Italy, Spain and Portugal would have become insolvent without the large-scale bond buying of the ECB. In return, recipient states had to swallow the bitter pill of austerity.
That the ECB effectively funds governments’ spending, in violation of European constitutional treaties, by buying their debt has been brushed under the carpet. No one could stomach the alternative policy of kicking out countries from the eurozone. Monetary financing became normalised during the pandemic when Europe, like the rest of the world, had to spend whatever it took to keep economies ticking over. This was the right thing to do.
