It’s increasingly probable that the European Central Bank will embark on a program to buy huge amounts of government bonds, a process known as quantitative easing. This is arousing great fear in Germany.
Critics say it will be ineffective, hurt savers, and stop governments from making much-needed reforms.
These worries are, for the most part, unfounded. Germans should be more concerned about the damage done to their own and other European economies if the ECB’s monetary policy fails.
An ECB program to purchase government bonds can be successful, if a series of conditions are met.
It will be very difficult to drop already very low interest rates for countries and function more like the U.S. Federal Reserve Bank’s second purchasing program after 2010.