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U.S. pols risk fate of Europe’s leaders in debt mess
“The European Central Bank can’t start the printing presses and finance government” the way the Fed does in the U.S., because of a constitutional prohibition against the bank participating in government bond auctions, said the ECB’s Mr. Glockler.
“Monetizing debt is out of the question” because of long memories in Europe, particularly in Germany, of debilitating bouts of “hyperinflation” brought on by such loose-money policies in the previous century, he said.
Rather than make it easier for wayward politicians, Mr. Glockler said, the ECB has acted as a sort of disciplinarian, providing financial aid only after hard political decisions are made. He suggested that the U.S. would benefit from the same arrangement between its central bank and Congress.
By allowing interest rates to rise to levels that pressure politicians to act, “we’re inducing responsible behavior in societies that didn’t have that before,” he said.
“It isn’t pretty,” he said, but “such a disciplining device on politicians in this country would be desirable as well.”
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