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But like an earlier policy instrument that was announced in the depths of the 2012 European debt crisis, there is a hope that the announcement of the tool alone would able to calm bond markets, and it will not ever have to be used.
“I can assure you that we would rather not use” the tool, Christine Lagarde, the president of the E.C.B., said. “But if we have to use it we will not hesitate.”
The decision to use the tool would be decided by the 25-member Governing Council, which is made up of the heads of the eurozone’s 19 national central banks and a six-person executive board, without disclosing specific details of what could trigger its activation. Any country would need to meet certain criteria to benefit from the policy tool, including having a sustainable trajectory of public debt and a “sound and sustainable” economic policy that adhered to the plans used to access the European Union’s recovery and resilience funds.
There’s “plenty of room for Italy” or other southern European economies such as Greece, Spain and Portugal, to fail to meet the eligibility criteria, Claus Vistesen, an economist at Pantheon Macroeconomics, wrote in an note to clients. “The key question is how strict these criteria will be enforced.”
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