"Governments cannot assume or expect that the ECB will always facilitate their funding independently of the achievement of their fiscal and other policy objectives"
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The line lands like a velvet-gloved warning: the age of effortless backstops has terms and conditions. Papademos is speaking in the measured dialect of central banking, but the intent is blunt. Governments, he argues, shouldn’t build budgets on the assumption that the European Central Bank will keep buying time - and bonds - no matter how sloppy the politics get.
The subtext is eurozone moral hazard, framed as technocratic common sense. A shared currency lets national governments borrow in a market that often treats “Europe” as one big credit story, until it suddenly doesn’t. The ECB’s extraordinary power to stabilize spreads can look, from a capital’s point of view, like an all-purpose escape hatch: spend now, reform later, let Frankfurt manage the consequences. Papademos is trying to close that hatch without sounding punitive, using the conditional language (“cannot assume,” “independently”) that signals credibility to markets and restraint to politicians.
Context matters: this is the post-crisis dilemma where monetary policy becomes de facto fiscal policy, whether anyone admits it or not. The ECB can prevent panic, but it cannot supply legitimacy for governments that won’t tax, cut, or reform in ways their own voters will tolerate. So the sentence functions as boundary-setting: central bank support is not a blank check; it’s leverage. If you want the umbrella, you don’t get to keep dancing in the rain.
The subtext is eurozone moral hazard, framed as technocratic common sense. A shared currency lets national governments borrow in a market that often treats “Europe” as one big credit story, until it suddenly doesn’t. The ECB’s extraordinary power to stabilize spreads can look, from a capital’s point of view, like an all-purpose escape hatch: spend now, reform later, let Frankfurt manage the consequences. Papademos is trying to close that hatch without sounding punitive, using the conditional language (“cannot assume,” “independently”) that signals credibility to markets and restraint to politicians.
Context matters: this is the post-crisis dilemma where monetary policy becomes de facto fiscal policy, whether anyone admits it or not. The ECB can prevent panic, but it cannot supply legitimacy for governments that won’t tax, cut, or reform in ways their own voters will tolerate. So the sentence functions as boundary-setting: central bank support is not a blank check; it’s leverage. If you want the umbrella, you don’t get to keep dancing in the rain.
Quote Details
| Topic | Money |
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