[RobertoG]

The ECB can't "run out of ammo", but you are right that they could stop, for political reasons, financing the Euro countries covertly in the secondary market like they are doing now.

Or maybe they just will keep that gun to the head and they will use that thread for running the show and impose more counter-cyclic policies. In that case the answer will come from the voters (like it's happening in Italy now).

[pas]

> In that case the answer will come from the voters (like it's happening in Italy now).

Could you expand on this please, what's happening in Italy, how that connects to the ECB open market policies?

[RobertoG]

I can try..

The Euro is basically a foreign currency, so Italy have lost any saying in its monetary and fiscal policies. Austerity in times of recession is craziness, but is the order that come from Brussels.

The new government in Italy is basically anti-euro. Those so called "populist" governments don't happen by accident but when the people is very unhappy with the economy.

As the Euro is, in essence, a foreign currency, there is really a risk that Italy and others could be in the situation where they can't finance themselves. That would be the end of the Euro.

In the year 2012 that almost happened. There was a public debt crisis that finished the (and this is not an exaggeration (1)) exact day that the ECB decided to finish it.

What the ECB is doing now (since 2012), is buying the public debt of Italy, Spain and others in the secondary markets (2).

They can't do it directly because is forbidden. This has to be done, because, otherwise will be the end of the Euro.

Interestingly, buying in the secondary market is also against the treaties (3) but they hide it in technicalities.

At the same time, this is used as leverage for dictating the economic policies of those countries from Brussels.

The result of those policies is what bring the "populist" to the government.

(1)-https://www.telegraph.co.uk/finance/financialcrisis/9428894/...

(2)-https://www.bloomberg.com/view/articles/2015-12-04/the-ecb-s...

(3) https://elpais.com/elpais/2012/10/24/inenglish/1351097206_05...

[emn13]

For another perspective on this: although I totally agree with what you say, there's also the side of the story where in people love to blame others for failings. When greece plunges into crisis; people blame politions, blame the EU - even though those entitities are entirely and truly democratic. They're not blaming themselves. When northern europe decides to ignore the southern problems even though they're in a union, they blame perhaps their own politicians or the EU for mismanagement, and perhaps their southern neighbors, but certainly not themselves.

But this weird perspective also correlates with a drop not just in voter participation, but perhaps also in the care taken in voting. Seriously, protest votes are a kind of shooting yourself in the foot because the guy next door is so mean - but quite common, at least nowadays.

Almost certainly those who will suffer most from populism in italy will be the voters who voted for them; just as those who voted for e.g. trump are likely to achieve the exact opposite of what they're so angry to... prevent? achieve?

It's not just one country; almost every single modern democracy is afflicted to some extent. We may have misattributed democracies past successes to the technicalities of voting, missing the much larger, less trivial social context in which it works. But certainly whatever the cause - it's much deeper than something like the ECB mishandling the situation in Italy.

[RobertoG]

"But certainly whatever the cause - it's much deeper than something like the ECB mishandling the situation in Italy. "

This is not a mishandling, the ECB is what is, for now, saving the Euro.

The problem, in Europe, at least, is the design of the Euro is flawed. A different question is if that flawed design it's being used for other goals.

[pas]

Thanks for the effort, the details, the links, and the comment!

How do these two things square against each other?

> Austerity in times of recession is craziness, but is the order that come from Brussels.

> What the ECB is doing now (since 2012), is buying the public debt of Italy, Spain and others in the secondary markets (2).

It seems to me that "austerity" is the buzzword used by states that want to inflate away their debt.