PEER STEINBRÜCK, strongman of Germany’s opposition social democrat party (pictured), would like the European Investment Bank (EIB) to take over from the European Central Bank (ECB) as the chief source of emergency funding for the euro-zone periphery. The ECB, he argues, is heading down the slippery slope of lending to states, by the thinly-disguised ruse of lending to their banks.

The ECB cannot force reform programmes on peripheral countries as a lending condition, he told a gathering of bankers in Frankfurt on September 4th, so why is it going behind their backs and lending to their banks? “I’m sceptical that the ECB can go on doing this,” he said.

The advantage of using the EIB as a conduit instead is that it can impose risk-adjusted interest rates on borrowing countries as an incentive for them to reform, he argued. The EIB also has a banking licence, which allows it access to ECB liquidity when necessary. The proposed €700 billion European Stability Mechanism, which is still waiting for approvals which may never come, is not designed to have a banking licence.

Mr Steinbrück’s views are important because he could emerge as chancellor, or finance minister, in some constellation of coalition after federal elections next September. If the euro-debt crisis has muddled on till then, his proposal might stand a chance. Unlike Angela Merkel, the current chancellor, who makes policy moves in little steps, Mr Steinbrück is not shy of shooting from the hip. “A 'no-trespassing sign' (Denkverbot) has been slapped on the idea of a debt union,” he said. “But I can tell you no one in my party is in favour of Eurobonds without conditions.” Eurobonds would be debt securities issued with the guarantee of all euro-zone countries.

Many different models have been proposed. Mr Steinbrück’s idea for such bonds to be issued by the EIB (whose existing debt is backed by the entire European Union) would give peripheral euro-zone countries access to centralised funding, but at rates reflecting their perceived willingness to reform. Those rates might be considerably better than the punitive spreads that nervous markets are demanding from Spain and Italy to refinance their debt.