European Central Bank (ECB) head Mario Draghi has offered yet another eurozone rescue proposal. This one appears to go much further than past attempts: It would allow, for the first time, unlimited purchases of eurozone member bonds – provided that issuing countries adhere to strict economic reforms. This offers the possibility of making the ECB a bank of last resort, which some analysts say is necessary (though not sufficient) for successful reform.
Wharton finance professor Franklin Allen comments on the viability of the new proposal, which faces tough challenges before — and after — any potential implementation.
For more comment from Franklin Allen on the new proposal by Draghi and the ECB, see:
Let Spain, Greece (and maybe Italy) Exit the Eurozone Temporarily, Devalue and Grow
Don’t Expect Long-term Relief from the New ECB Funding Proposal
Europe’s Policies Increasingly Risk Default and Uncompetitiveness
