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Off with his head

Who is Alice in euroland? Is it the average euro-punter watching his assets disappear down a deflationary rabbit hole? According to Willem Buiter, Cambridge economics professor and a member of the Bank of England's monetary policy committee, the white rabbit is the European Central Bank (ECB). It's operating on flawed principles, he says in a paper, Alice in euroland, published by the Centre for Economic Policy Research (CEPR). Hoping that his criticism will be constructive, he recommends the ECB should have greater accountability – publishing its minutes and answering to a parliamentary/judicial committee – and a smaller governing council and executive board, so it can act more promptly. Above all it should have the role of lender of last resort, so that, like the US Federal Reserve, it can stand behind the currency and, implicitly, support the major credit institutions when they're strapped for cash.

Buiter's paper seemed to impress the great and the good gathered at London's Glaziers Hall until a former Bonn finance official Klaus Regling, now managing director of Moore Capital Strategy Group, stood up and took issue. "The Bundesbank didn't need to be a lender of last resort," he opened. "How often did a central bank have to pump in big money?" Buiter sighed.

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