Understanding the major structural differences between the United States and the euro zone that strongly influence their central banks’ behaviour

The Federal Reserve and the ECB cannot behave in the same way because of significant structural differences between the United States and the euro zone. The se are: The fact that the United States, within which capital flows freely, can easily attract capital from the rest of the world. For the peripheral euro-zone countries, t his has no longer been the case since the 2010-2013 euro-zone crisis and the end of capital mobility between the euro-zone countries. This greatly increases the risk of a balance-of-payments crisis for the se countries, which, in the euro zone, takes the form of a halt to purchases of a country’s government bonds. The ECB must then be willing to replace private buyers of euro-zone government bonds at any time (hence the need to be able to buy the bonds of specific countries); If a US state is in financial difficulty and may have to restructure its debt, nobody imagines a break-up of the United States and the demise of the dollar; if a euro-zone country may to have to restructure its debt, there is immediately speculation of a break-up of the euro. This forces the ECB to ensure the sustainability of each euro-zone country’s public debt, not just the overall sustainability of euro-zone public debt. In contrast, the Federal Reserve does not have to worry about the fiscal position of individual states.