....Moreover, the ECB is unwilling to be creative in pursuing
policies—like those embraced by the Bank of England—that would
ameliorate the credit crunch. Unlike the US Federal Reserve and the Bank
of Japan, it is not engaging in quantitative easing; and its “forward
guidance” that it will keep interest rates low is not very credible. On
the contrary, interest rates remain too high and the euro too strong to
jump-start faster economic growth in the euro zone.
In the meantime, austerity fatigue is rising in the
eurozone periphery. The Italian government is on the verge of
collapsing; the Greek government is under intense strain as it seeks
further budget cuts; and the Portuguese and Spanish governments are
having a hard time achieving even the looser fiscal targets set by their
creditors, while political pressures mount.
And bailout fatigue is emerging in the euro zone core. In
Germany, the next coalition government looks set to include the Social
Democrats, who are pushing for a bail-in of the banks’ private
creditors, which would only exacerbate balkanization of the euro zone’s
banking system; and populist parties throughout the core are pushing
against bailouts for banks and governments alike.....- in livemint
