Jeroen Dijsselbloem Aris Messinis/Getty Images

Who Will Be Europe’s Alexander Hamilton?

Now that the European Central Bank has exhausted its options, national governments should come together to lead Europe's economic recovery. What is needed is a new presidium within the Eurogroup, which would help coordinate economic policymaking and lay the groundwork for the establishment of a fiscal union.

TILBURG – Not too long ago, the European Central Bank’s actions were usually met with cheers. But more recently, the ECB has drawn criticism from not just bankers and economists, but also citizens and politicians.

With returns on fixed-income investments decreasing, investors are being forced into equity investments, which have become riskier and more expensive, owing to increased uncertainty about financial and economic stability. That uncertainty reflects the fact that the ECB’s extremely low interest rates are serving to prevent desperately needed structural reforms in eurozone countries with high deficits and debt.

The big question now is whether the ECB’s current monetary policies are doing more harm than good. The ECB’s official aim is to reach an inflation target of close to 2%. But despite massive liquidity injections, the eurozone’s inflation rate has fallen, indicating that there is insufficient demand in the real economy. Indeed, demand is stagnating because many companies cannot make investments until they have reduced their debts.