The Japanification of the Eurozone

-ECB holdings of government debt are now very close to Japanese levels

 
 -As the largest Eurozone economy, with some of the lowest debt levels, Germany wields increasing influence over its neighbours’ economic policies. Unluckily for fans of unrestricted public largesse, the new German finance minister is Christian Lindner, a dry-as-dust fiscal conservative. The fact that he’s just praised the “very impressive reform measures” (forced upon the Greek government in the wake of the Eurozone crisis), is a warning of what may be to come. 

Governments around the world have borrowed their way through the Covid crisis. Increasingly, they’ve relied on their own central banks — like the US Federal Reserve or the Bank of England — to buy-up government bonds.

But where do the central banks get the money they need to do this? The answer, of course, is from nowhere. It is created out of nothing through the magic of quantitative easing or QE. Because nothing is an inexhaustible resource, central banks have been able to print trillions of dollars of “free” money, which has been used to purchase bonds.

As a result central banks own an ever-greater share of their own governments’ debt. An extraordinary chart from Robin Brooks shows just how dramatic the surge has been:

 
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Πηγή: unherd.com