A perceptive piece in the FT today from one of our favourite International Affairs commentators, Gideon Rachman: Mario Monti’s commitment to an unlimited bond-buying programme to preserve to Euro may appear to have calmed markets, but there is a danger it will come at a high political cost.
The German parliament and courts are unable to challenge the ECB decision because the bank is an EU institution. The result is that German taxpayers find themselves potentially on the hook for billions, without being able to reverse the decision at the ballot box.
On the other side, countries whose bonds are bought would have to have their budgets supervised by the IMF and directed from Frankfurt or Brussels. This would deal a rather nasty double blow of national humiliation and recession, a potentially toxic cocktail that could lead to the rise of political extremism (indeed, in Greece it already has).
An angry and isolated Germany on one side, southern European countries mired in recession and political extremism on the other. How can that possibly end well?
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