A euro sign is photographed next to an emergency phone box outside the former headquarters of the European Central Bank (ECB) in Frankfurt, Germany. REUTERS/Kai Pfaffenbach After much hesitation and amid intense controversy, the European Central Bank is stumbling towards a program of sovereign bond purchases. This monetization of government securities does not come without tail risks, since euro-area member states can default on their public debt, as the Greek experience has shown. In order to immunize the shareholders of the ECB, namely the national central banks, against potential losses from such an operation, a simple accounting technique has been proposed: purchases would not be undertaken jointly, but rather would be made on the accounts of individual national central banks of the euro zone. The Bundesbank would buy Bunds, the Banca d'Italia BTPs, the Bank of Greece would purchase Greek government bonds - and each institution would keep these assets on its own balance sheet, and, crucially, at its...
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