The Euro Area Crisis and the Two ECB

The ECB reacted swiftly and efficiently when the financial crisis burst in 2007 but it then experienced difficulties to cope with the euro sovereign debt crisis. Up till July 2012 the ECB refused to act as lender of last resort thus aggravating the crisis. Then the new ECB took a courageous bend and launched the OMT program, even as it has not yet been challenged by financial markets. The difference of reactivity between the two ECB may have two different reasons. On the one hand, the old ECB may have realized too late the seriousness of the crisis or may have tried to resist to an unavoidable contagion. On the other hand, it may have been paralyzed by political constraints. But the quick adoption of the OMT program highlights that such constraints can be put aside when required.