Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

As the eurozone crisis heated up again in April and July 2011, the ECB, in one of the most misguided decisions in the history of monetary policy, raised rates.28 In the ECB’s defense, it was true that inflation in Germany and other hotspots of the eurozone economy was picking up. The asymmetry between the relative prosperity of Northern Europe and the rest of Europe was all too real. But the ECB’s move was clearly intended as a political signal. The ECB was asserting its independence. It was putting Europe’s governments on notice. It would be up to them to take responsibility for the debt markets.29 Nor were interest rates the only way to send the message. Without fanfare, indeed, without public announcement of any kind, in mid-March the European Central Bank stopped purchases of eurozone sovereign bonds and introduced differentiated haircuts on repos for lower-rated bonds.