Eurozone quantitative easing was launched to save the single currency bloc. But it may end up making it easier to break the eurozone apart.
Since it was launched this month, the European Central Bank’s open-ended programme of €60bn a month in asset purchases has succeeded in dropping government borrowing costs to record lows. By weakening the euro, it has also boosted exports, sent equities soaring and raised hopes of a eurozone recovery.
But in so doing, it may also be masking the pain of a potential Greek exit from the euro — a prospect that once terrified financial markets and the country’s eurozone partners but no longer seems so frightening to them.
“For the moment, everything is being artificially hidden by the QE,” said Philippe Gudin de Vallerin, chief Europe economist at Barclays.
Just how consequential a Greek eurozone exit, or Grexit, might be has become one of the most urgent questions for the 19-member currency bloc as a new hard-left government in Athens runs out of cash and is clashing with its creditors.
Many eurozone officials now doubt that Greece has the funds to cover both €1.7bn for government salaries and pensions this month and a €450m payment to the International Monetary Fund due on April 9.