Can the eurozone economy be revived without budget deficits? | Barry Eichengreen

Countries such as Germany are dead set against borrowing to fund fiscal stimulus

The eurozone is in a bind. Despite successive doses of monetary stimulus by the European Central Bank, inflation remains stubbornly below target. Conventional monetary policy, and even quantitative easing, evidently have limited potency when interest rates are at or near zero.

Monetary sceptics worry that lowering rates further will damage Europe's banks. Additional asset purchases beyond the monthly level of a20bn (16.8bn) already agreed, they warn, will impair the liquidity of financial markets. By pushing up asset prices, the ECB could expose the financial system to stability risks when those lofty prices return to earth.

Related: Public borrowing is cheap but ramping up debt is not without risk | Kenneth Rogoff

This impasse has prompted suggestions that the ECB should pursue fiscal policy by stealth