Perpetuum Mobile (perpetual motion machine)

A pejorative term that emerged around 2010 for the proposal – put forward primarily by politicians – that the European Stabilization Mechanism be given a banking license. The ESM would then be in a position to – purchase government bonds on the secondary market, – immediately offer them to the ECB as collateral, – and use the resulting inflow of central bank money to buy new securities. In this way, the ESM would have enormous leverage and could make unlimited sums available to support over-indebted members. This would obviously undermine the regulatory ban on government financing by the central bank. – The proposal met with sharp criticism, especially in Germany. This is because it opens the door to indirect debt financing via a European institution and introduces liability without control. The pressure to consolidate public debt would diminish. – At the meeting of EU heads of government at the end of October 2011, this proposal, which had been strongly favored by many until recently, was finally (?) set aside – especially due to the objections of Germany, the Netherlands and Finland. – See bail-out, fiscal pact, Japanization, moral hazard, TARGET abuse.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/