Euro zone: The “Japanisation” of the ECB’s balance sheet

Because the ECB has kept interest rates at zero, the only possible policy response to a sharp growth slowdown in the euro zone would be an expansionary fiscal policy combined with the monetis ation of the additional public debt ( a resum ption of quantitative easing) to stop long-term interest rates from rising. Like Japan, in the future the euro zone may therefore see repeated episodes of fiscal deficit increases met with an expansion of the central bank’s balance sheet . The constant expansion of the Bank of Japan’s balance sheet and Japan’s zero interest rates have not led to capital flight thanks to the “financial nationalism” of the Japanese. Would this also be the case in the euro zone?