The euro and financial crisis: Should the ECB Extend Its Mandate Beyond Containing Inflation?

It is the European Central Bank’s task to safeguard price stability. In view of the debt crisis affecting several euro countries, should the ECB change course and engage in unlimited purchases of government bonds from countries hit by the crisis? What are the risks involved in pursuing such a policy? Thomas Straubhaar, HWWI and University of Hamburg, and Henning Vöpel, HWWI and Hamburg School of Business and Administration, believe that the ECB should play a more active role in addressing this acute crisis of confidence. However, it should not pursue a monetary policy intended to replace the structural convergence of the euro countries on the road to an optimal monetary area. On the contrary, it is the task of politics to safeguard convergence and prevent the ECB from playing a role that it ultimately cannot fulfil.