New: Tuesdays With Milton Ezrati

Look for insights on economic developments that impact corporate finance from Milton Ezrati, senior economist and market strategist for Lord Abbett, exclusively on T&R. This week: The ECB Rides to the Rescue

As the new year began, good reason arrived to expect relief in Europe’s financial crisis. The European Central Bank (ECB) signaled that it had jettisoned its former hands-off policy and begun, at last, to support European financial markets. The remarkable nature of the change drew only a few headlines and even less commentary, but it deserves more. ECB help is crucial. Only Europe’s central bank has the financial wherewithal to ease the panic over sovereign debt. Its new willingness to provide needed liquidity, if it continues, as it seems it will, can do more to stabilize markets than any number of Merkel-Sarkozy embraces or agreements.

Liquidity, of course, cannot answer all the continent’s needs. Europe’s problems run deep. Governments need to rethink not just their fiscal policies but their political-economic frameworks. The European Union (EU) may ultimately need to rethink the structure of its common currency, the euro. But by relieving markets of the waves of panic they have suffered periodically during the past two years, ECB liquidity can buy the stability Eurozone nations need to carry out their longer-term, more fundamental reforms. 

About the Author

Milton Ezrati

Milton Ezrati

Milton Ezrati is senior economist and market strategist for Lord Abbett & Co. and an affiliate of the Center for the Study of Human Capital and Economic Growth at the State University of New York at Buffalo. His latest book, Thirty Tomorrows, linking aging demographics and globalization, will appear next summer from Thomas Dunne Books of St. Martin’s Press. See more of his articles about the economy here.

 

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