Give the United States Federal Reserve System the power to create euros at will, at its discretion, subject to no outside checks. This power may last for a specified number of years or who knows, maybe forever.
The Fed’s incentive is not exactly to maximize European social welfare, but it is probably close enough. The Fed’s incentive is to prevent contagion from spreading to the United States and its banking system. Toward this end it would create euros and distribute them to various European banking systems, or lend them out, do more swaps, etc. It would help Europe but in a fairly balanced way, in particular the Fed probably would not “screw over” the major U.S. allies on the Continent, namely France and Germany.
Bernanke has a track record of dealing with severe financial crises, no? And is he not insulated from the worst of European politicking and gridlock? Foie gras and feta probably would not sway him, and the EU would have to agree to this only once. No further plans need be announced and no coalition governments will have further checks. Stock markets would rise immediately.
Conservatives might not mind if the Fed “wrecked the European economies with inflation.”
This law need not preempt other European initiatives, if those initiatives were to prove desirable. The ECB would be ceding no powers whatsoever and it would not have to modify its charter.
Forget about the dual mandate, we need Dual Central Banks.
Such a rescue operation is not without historical precedent.
And while we’re at it, let’s give the ECB the power to create dollars! (just kidding folks…or am I?)