The Hill News

This summer, I wrote about the Eurozone’s fiscal crisis and identified four key components to achieve a comprehensive restructuring.    At that time, all eyes were on Greece.  Since then, the level of the crisis has intensified, placing Italy in the cross hairs.   Italy’s debt level is unsustainable and its bond yields are too expensive.  The fear is that when Italy needs to refinance significant portions of its debt, investors will either be unwilling to purchase its bonds or demand yields that will make a refinancing prohibitively expensive.
 
It is time for the ECB to act boldly.  Our fickle equity markets have reacted positively to recent changes in the political leadership of Greece and Italy.  The markets pin their hopes on new leadership and its ability to pull Europe back from the brink.  While strong political leadership is important, economic leadership by the ECB is critical.  The Eurozone is in the throes of a debt crisis, not a liqui! dity crisis, and it needs the ECB to act as the lender of last resort rather than a champion of forced austerity measures.
 

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