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By Ambrose Evans-Pritchard
The Maastricht Treaty prohibits the ECB from injecting stimulus by purchasing the government debt of the eurozone’s fifteen states debt — a method known as “monetizing the deficit” or, more crudely, as “printing money.”
But it can achieve the same effect
by mopping up sovereign debt, mortgage securities, or even company debt on the open market, as the Fed has already begun to do. At the moment the ECB accepts some of these assets as collateral in exchange for loans, but it has not yet hit the atomic button by buying them outright with its own freshly-minted fiat money.
When the ECB accepts collateral for loans, it doesn’t offer non recourse funding. The owner of the securities remains liable in the case of default.