ECB objectives and tasks. Price stability vs lender of last resort

In the wake of the US subprime crisis the ECB, along with other major central banks, expanded its liquidity provision to the system. As long as the exceptional character of such actions is clear and as long as misbehaviour is effectively sanctioned, this will not give rise to substantial moral hazard. Also, the actions do not stand in contradiction to the ECB’s primary objective, i.e. the preservation of price stability. However, recent events have highlighted well-known deficiencies in the EU’s arrangements for more effective crisis management.