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Managing sovereign debts held by the Eurosystem: Operational and legal constraints

Managing sovereign debts held by the Eurosystem: Operational and legal constraints

There have been various proposals for how to manage the sovereign debt portfolio accumulated by the Eurosystem in its efforts to raise inflation and provide emergency support in response to the pandemic. This column argues that the euro area needs a new mechanism to free the Eurosystem of the encumbrance of its sovereign portfolio. Such a mechanism cannot be provided by the Eurosystem itself, since this would eventually be inconsistent with its mandate. Instead, the European Stability Mechanism could perform that task while respecting all relevant European law […]