>> GROUP: Shadow ECB Council / EZB-Schattenrat  Willem Buiter

Willem Buiter: As regards Italy, the risk of the country leaving the Eurozone voluntarily, either through a Parliamentary vote or through a referendum is low.

The risk of Italy crashing out involuntarily as the result of a sovereign debt crisis and banking sector crisis is a material one. Such a crisis should be addressed through the OMT (with conditionality and an ESM programme, including a sovereign debt sustainability analysis; should the existing debt be deemed unsustainable, it should be restructured up to the point where it is sustainable).

There is no reason to cut interest rates further or to extend the duration or increase the scale and scope of the enhanced APP to deal with the Italian developments, unless it threatens to depresses Eurozone-wide inflation to the point that the regular monetary policy mandate calls for additional stimulus. We are not in that position at the moment.
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