I am not alone in proposing green quantitative easing. The following, published over the weekend is a very similar argument to mine:
Here is what the ECB could do to achieve its objective while overcoming both its ‘operational problem’ and the ‘macroeconomic concern’:
- The European Investment Bank (EIB) should be given the green light to embark upon a Pan-Eurozone Investment-led Recovery Program to the tune of up to 8% of the Eurozone’s GDP, concentrating on large scale infrastructural projects while its offshoot the EIF concentrates on start-ups, SMEs, technologically innovative firms, green energy research etc.
- The EIB has been issuing bonds for decades to fund investments, covering 50% of the projects’ funding costs. It should now issue bonds to cover the funding of the Pan-Eurozone Investment-led Recovery Program to the full; that is, by waving the convention that 50% of the funds come from national sources.
- To ensure that the EIB bonds do not suffer rising yields, as a result of these large issues, the ECB ought to announce its readiness to step into the secondary market and purchase as many of these EIB bonds as are necessary to keep the EIB bond yields at their present, low levels.
The merit of this proposal is that, essentially, it recommends that the ECB enacts QE by purchasing a single asset; the solid, non-toxic, non eurobonds issued by the EIB on behalf of all European Union states. Thus, the ECB’s operational concern about which nation’s bonds to buy is alleviated. Moreover, the proposed form of QE backs productive investments directly, as opposed as to inflating risky financial instruments.
The argument is on the blog of Yanis Varoufakis, the finance minister of Greece, and it makes complete sense. He even uses the language of the New Deal to support his case:
Come to think of it, what we have here is the potential for simulating a European New Deal without the need for a federal treasury, for any type of fiscal transfers, or for any new institution. While the richer nations, with Germany at the fore, will not need to pay a single euro toward this European New Deal, Europe needs leadership from surplus countries, like Germany, to bring this about.
So just what is the problem?