Goldman Sachs chief European economist Huw Pill was setting monetary policy at the European Central Bank as recently as last summer, which gives him a unique perspective on the crisis.
In an interview with Bloomberg TV, Pill weighed in on the euro crisis and where it goes next.
Regarding the ECB’s OMT bond market intervention program – unveiled in August but yet to be implemented – Pill said it really only buys time for the central bank:
There will remain risks. I think those risks – or perhaps the extreme tail risks – have been contained by the ECB’s actions, but I think there are certainly threats of greater volatility or some disturbances.
I think this phase will continue probably for another year. Likely longer – almost certainly for 18 months, and it will only be at that sort of horizon that we can really begin to even think about coming through the crisis.
Pill also had some bad news for those waiting for the ECB to make a big splash in peripheral bond markets:
We don’t think the ECB is going to be ambitious in terms of driving down short-dated yields in Spain much below where they are now. We think the ECB is relatively content with the current level in Spain.
By the same token, we don’t think the ECB will go out and make large, systematic, almost pre-announced block purchases of Spanish debt. They’ll rather anchor the short end of the yield curve through sort of “guerrilla tactics.”
These comments echo research that Pill published before the ECB officially unveiled OMT in August. For a more detailed look at what Pill expects from the ECB, see here.
Watch the full interview with Pill below: