A decade ago, the European Central Bank took its first step to becoming the euro area’s firefighter-in-chief.
Its 95 billion-euro ($112 billion) emergency loan to banks on Aug. 9, 2007, was the initial response to a financial crisis that would force the Frankfurt-based institution to expand its balance sheet by trillions of euros. The ECB — together with international peers such as the Federal Reserve and the Bank of England — took center stage in an unprecedented battle against bank failures, recessions and sovereign-debt turmoil that changed the economic landscape and forced a complete rethink of what monetary policy can and should do.
The ECB’s job was additionally hampered by an incomplete currency zone weighed down by infighting and paralysis. But with the recovery finally holding up after years of stimulus and hard-fought economic reforms, central bankers have started to contemplate a return to more normal policies. One of many milestones on that path is expected in the fall, when ECB President Mario Draghi may offer an outline of a gradual exit from a 2.3 trillion euro bond-buying plan.