The European Central Bank has delegated its lender of last resort duty to panicky bankers who are the slaves of market sentiments. Pumping in over 1,000 billion Euros this way has not stabilized Europe’s sovereign debt markets

Since December 2011 the European Central Bank (ECB) has pumped two waves of extra liquidity into the European banking system, in an effort to keep it afloat – and persuade backs to invest in sovereign debt. Yet Paul De Grauwe argues that these banks are still wracked with uncertainty, which may lead to further sell-offs of this debt – the very opposite of the ECB’s intent. The ECB could have avoided much of the crisis by being a lender of last resort in direct support of Eurozone governments with sovereign debt crises.