Dangerous embrace: disentangling bank and state
In the four months between the start of December last year and the end of March, Italian and Spanish banks bought more than €140 billion in government bonds – much of them issued by their domestic debt offices. They did it using the 1% loans offered by the European Central Bank (ECB) in December and February – contributing to a dramatic reduction in financing costs for both countries.
What’s wrong with this picture? Well, the ECB’s injection of liquidity was originally conceived as part of a co
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