Rescue operations involving sovereign debt have included temporarily moving bad or weak assets off the balance sheets of the weak member banks into the balance sheets of the European Central Bank. Such action is viewed as monetisation and can be seen as an inflationary threat, whereby the strong member countries of the ECB shoulder the burden of monetary expansion (and potential inflation) to save the weak member countries. Most central banks prefer to move weak assets off their balance sheets with some kind of agreement as to how the debt will continue to be serviced. This preference has typically led the ECB to argue that the weaker member countries must: COUNT 5
QSN1 What can be shuffeled around during a soverign debt crisis to mitigate the damage? ANS1 temporarily moving bad or weak assets QSN2 Where do bad and weak assets get moved in times of soverign debt crisis? ANS2 the balance sheets of the European Central Bank QSN3 What is shuffling around bad or weak debts from a weaker eurozone member to the ECB known as? ANS3 monetisation QSN4 What is monetisation usually viewed as? ANS4 inflationary threat QSN5 If the central banks can come to an agreement with the eurozone member about the continued repayment of the debt, what happens to the bad or weak debt? ANS5 move weak assets off their balance sheets