European authorities are sending out contradictory messages. The European Central Bank claims everything will be done to bail out troubled governments, while the head of the newly-created Single Supervisory Mechanism Daniele Nouy has announced that sovereign debts are no longer risk-free, writes economist and GIS consultant Professor Enrico Colombatto.
Ms Nouy says some European banks are bound to fail and will be allowed to fail. The likely victims could be banks with large quantities of bad government bonds.
The mixed messages may conceal two different stories which are not mutually exclusive – an attempt by the newly-created agency to lay claim to power; and a cautious approach by the ECB to prepare the ground for Euro-tapering, says Professor Colombatto.
About the Author
GIS author Professor Enrico Colombatto is a professor of economics at the University of Turin, Italy. He is also Director of the International Centre for Economic Research (ICER) in Turin and Prague and Director of Research, Institut de Recherches Economiques et Fiscales (IREF) in Paris.
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