The Euro Area Sovereign Debt Crisis and the Role of ECB's Monetary Policy

Abstract

Against the background of the economic and financial crisis, public finances severely deteriorated in many EMU Member States and a new crisis, of sovereign debt, emerged. Considering ECB's recognized responsibility for ensuring overall financial stability, our paper shortly overviews the main monetary policy measures it adopted since May 2010, proving the vital roleof ECB's interventionin countering the effects of the sovereigndebt crisis. The added value of our work mainly results from the coherent analysis of the interconnections between sovereign crisis, banking crisis and the real sector of the economy, as determinants for ECB's intervention, as well as from highlighting the potential risks entailed by ECB's actions over the medium and long term.

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