Euro zone: “Whatever it takes” is still necessary

On 26 July 2012, Mario Draghi announced that the ECB would do whatever it takes to preserve the integrity of the euro zone. This led to an ultra-expansionary monetary policy: zero or negative interest rates, long-term repos for banks, quantitative easing. But the problem is that this imperative remains : if euro interest rates were normalised, fiscal solvency would disappear very clearly in France and Italy and there would be another euro-zone public debt crisis. For “whatever it takes” to no longer be needed today, public debt ratios would have had to have fall en considerably and potential growth would have had to have rise n , which would enable the countries to remain fiscally solvent with higher interest rates. The public debt ratio has declined only in Spain and Portugal, and potential growth has not risen anywhere.