Calls for the ECB to do more have been a persistent theme over the past year. Economists routinely like to joke that the ECB is way behind the curve relative to the Fed. What does the evidence say?
The Economist had an article last week detailing how the ECB finds itself in a rough spot. Most interesting to me was the chart accompanying the article:
As much criticism as the ECB gets, it now has the largest balance sheet among all of the central banks. And as much as people refer to Helicopter Ben as the most aggressive of central bankers, the Federal Reserve has the smallest balance sheet relative to GDP. As hard as it might be to believe, I think the Federal Reserve would be much less likely to cut collateral requirements like the ECB has done in the past week. Bernanke has been adamant that the Federal Reserve is very careful about not taking on undue balance sheet risk. Meanwhile, the ECB is increasingly exposed to dodgy peripheral banking assets as part of their rescue programs due to their LTRO programs.
In short, the members of the ECB, particularly the Germans, are getting increasingly nervous about balance sheet risk. The Bank of International Settlements report this weekend highlighted the hesitancy of central banks to take on more balance sheet risk. As much as the peanut gallery calls for more action from the ECB, I think it is becoming less likely rather than more likely as their balance sheet risk grows.