Daniel Gros writes: Within the eurozone, where until recently external accounts were nearly balanced, a similar creditor/debtor spectrum has emerged, with Germany and the Netherlands at one end, and much of the eurozone south at the other. This partly explains both the hostile stance toward QE adopted in the German financial press and the over-indebted periphery countries’ increasingly desperate calls for more action by the ECB.

In the eurozone, however, QE is a questionable response to such calls. QE is a special instrument used when a central bank’s short- and medium-term policy rates are already at zero and it wants to lower long-term interest rates. This implies that QE can be effective only in economies in which changes in long-term (market) interest rates play an important role in the private sector.

But this is not the case in Europe, where most investment is financed via bank loans that typically do not have long-term maturities – often less than five years – because banks themselves have little secure long-term financing. Moreover, the interests rates charged on these loans are not linked to market rates, but rather to the bank’s refinancing cost, which is already close to zero     Credit and Debt