* Shifting the debate to the technicalities
The leaks in the Dutch press yesterday suggest that the debate on QE within the Governing Council has shifted to the technicalities, even if those have obviously a strong bearing on the overall message that the central bank would send with purchasing government bonds. We think that the "three options" listed in the article are only a restricted version of the menu currently contemplated by the Governing Council, but they provide a handy framework to think about it:
- Option 1: "Vanilla QE": purchases of government bonds across a wide array of constituencies, with full mutualisation of the subsequent risk across all Eurosystem members.
- Option 2: Full mutualisation of the risk, but with a restriction of the purchases to best quality bonds.
- Option 3: Purchases across a wide array of constituencies, but with limited mutualisation (NCBs would