“whatever it takes”: the ECB remains busy with crisis management

For a long time, debt sustainability concerns were hidden under a surface of abundant central bank liquidity in a zero interest rate environment. Once this regime of monetary stimulus and zero interest rates is gone, such imbalances may become visible again. In the pursuit to avoid fragmentation risk, and in the absence of other politically feasible solutions, the ECB could be tempted to lean towards tightening monetary policy too slowly at the cost of persistent deviations from the inflation target.