Although France and Germany are still wrangling over the part that the European Central Bank should play in resolving the spreading debt crisis across the eurozone, apparently one thing is believed possible despite their disagreements: that the ECB could start printing money.
A Reuters poll put the odds of such a quantitative easing action at a median 48%, among European and U.S. bond strategists, despite Germany’s opposition to anything that might spur inflation.
A Bloomberg report on Friday said that French President Nicolas Sarkozy had backed down on his stance that the ECB should provide such a backstop against eurozone borrowing, acknowledging German fears of a return of the inflation the nation experienced between the two World Wars. However, a Reuters poll conducted this week among 50 bond strategists found nearly even odds that the ECB would resort to QE in order to quell contagion.
Most of those who said they believe QE will occur pegged the start date to occur by March of 2012. A small majority of those polled, 25 out of 49, said they believe that the ECB’s role will escalate into lender of last resort and provider of loans to troubled governments.
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ECB chief Mario Draghi was critical Friday of governments’ efforts to ward off contagion through reform policies, saying in the report, “Where is the implementation of these long-standing decisions? We should not be waiting any longer.”