Making the ECB the central bank of a non-federal coalition of states

Abstract

The recent euro area crisis increased fragmentation, thus further exposing the limits of the single monetary policy. The absence of a common fiscal authority impedes the birth of a single European financial market, which being at the centre of the European project would require financial operators to refer to a single risk-free yield curve. The paper proposes that by issuing debt certificates encompassing the entire maturity spectrum, the European Central Bank might establish a single risk-free yield curve. The advantage of the proposal is that it meets the objective of developing a single financial market without requiring any treaty changes. The recent crisis has made the policymaking and academic discussions focus on how to avoid serious financial disruptions such as the break-up of the euro area. However, it is equally important to look at the coherence and efficacy of the institutional and structural design of the euro area in more tranquil times, as done with the present proposal. JEL codes : E58, F33, F45