Rather than continuing the generous liquidity provision it had offered in 2009, the ECB allowed the LTRO scheme to expire.30 Then in April 2010 it began to discuss a new regime under which it would apply graduated repo haircuts to lower-rated sovereign bonds, limiting their attractiveness to banks.31 Trichet was engaged in the high-risk gamble of substituting pressure in the bond markets for the eurozone’s missing federal structures of fiscal and economic governance.
