Publication

In this commentary, the author argues that the eurozone requires a liquidity backstop for its fiscal authority. In a ‘normal’ economy with its own currency, the fiscal authorities can never face a liquidity shortage, because the government can always potentially rely on support from the central bank. A eurozone government, by contrast, is always in a precarious situation: It has only very long-term assets (its taxing power) and shorter-term liabilities, namely government debt, much of which has to be rolled over annually.