The balance sheet of the European Central Bank (ECB) represents a very small fraction (onetenth) of the reported balance sheet of the Euro Area system as a whole. This paper presents evidence that the effective size of the ECB’s balance sheet is massively higher than this, and indeed is significantly higher even than the reported balance sheet of the Eurosystem as a whole. We point to strong evidence that most NCBs (especially those of the larger countries) effectively act on autopilot, as branches of a near‐monolithic institution which we term the “Mega‐ECB”. The lending behaviour of the “Mega‐ECB” appears to have been driven primarily by the borrowing needs of the distressed countries of the EU’s southern periphery
