Photo: via Human Events
Support for European Central Bank (ECB) intervention in the eurozone crisis is on the rise, and George Soros has a piece in the Financial Times calling on the ECB to save the eurozone.With investor concerns driving eurozone sovereign bond yields to record highs and Germany rejecting any idea of joint liability for eurozone debt, here are Soros’ key arguments:
- The ECB needs to stop the “bond run” — investors selling bonds issued by eurozone countries and driving yields higher.
- Officials should use the EFSF to enable the ECB to act as a lender of last resort. That way the ECB could provide unlimited amounts of liquidity, while the EFSF guarantees the ECB against solvency risks. By doing this the ECB and EFSF could fix banks’ liquidity problems and ensure that governments could issue treasury bills for under 1%.
- The ECB should impose a ceiling on the yield of sovereign bonds of governments that have responsible fiscal policies, a ceiling that could gradually be lowered.
- If the ECB is ready to buy unlimited amounts of bonds, it would turn the interest rate ceiling into a floor, from which bond prices would gradually rise, without the ECB actually having to buy unlimited amounts.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.