In a Briefing Paper for ECON's Monetary Dialogue, Wyplosz writes that potentially unlimited action such as the OMT has succeeded, but the spreads remain large and volatile.
The Eurosystem is facing a particularly daunting challenge as it faces a mix of macro-economic and "sectoral" distress: it is sectoral in the sense that individual Member States with highly indebted governments face much higher interest rates than the other Member States. This does not just break the transmission mechanism down; it also imparts a powerful contractionary effect on the macroeconomies of the affected countries.
Since it affects some countries and not others, this situation requires that the central bank transfer income across countries, exactly like it transfers resources from national taxpayers to national distressed sectors. Limited actions like the SMP and LTROs have failed to reduce the spreads. Potentially unlimited action like the OMT has succeeded but the spreads remain large and volatile.
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