Further, the Bank of Japan is allowed to – indeed must, as the banker of the gov’t – purchase newly issued finance bills, which are simply not classified as gov’t bonds, and indeed have a very short maturity. But they are rolled over at will.

Normally, one would expect that there are ways in which governments can still borrow from the central bank, even if direct bond underwriting is out. If not, then this is just another reason why the Maastricht Treaty and introduction of the ECB has been madness. Most importantly, the ECB can do what it wants and legally not just governments but also parliaments have no influence whatsoever. And with the euro, governments have even given up their right to issue currency themselves. But I suspect one can find legal technicalities to make this still possible.

There is always the possibility of a European government to found and own a bank, which then creates credit and lends to the government, say at zero interest. Perhaps that’s the way to go.