How can the ECB deal with the risk of fragmentation?

This paper also argues that high spreads are less of a concern if confined to long-term debt, as short-term spreads signal more imminent risks and translate more quickly into higher debt service costs. The new ECB tool should thus be seen as constituting a first line of defence, concentrated on limited amounts on longer maturities. If this is not sufficient, countries with sound fundamentals may ‘buy insurance’ by using the ESM precautionary line – whose pre-set conditions are now broadly set – to unlock OMT, allowing for unlimited interventions, including at shorter maturities.