Feb 07, 202
Canceling debts run up by eurozone members is “unthinkable,” European Central Bank (ECB) chief Christine Lagarde said on Sunday, rejecting calls by members to buttress their economies during the COVID-19 crisis.
The ECB has taken unprecedented steps to cushion the economic blow from the pandemic in the 19-nation eurozone, launching a massive bond-buying scheme that has so far totaled 1.85 trillion euros ($2.2 trillion).
“Cancelling that debt is unthinkable,” Lagarde told France’s Le Journal du Dimanche weekly.
“It would be a violation of the European treaty which strictly forbids monetary financing of states,” she said, calling it one of the “founding pillars” of the euro single currency.
She was reacting to a call Friday by more than 100 economists for the ECB to further boost the economic recovery of debts of eurozone members by forgiving them.
In the letter published in several leading European newspapers, the economists noted that a quarter of the public debt of nations that use the euro – 2.5 trillion euros ($3 trillion) – was now held by the ECB.
“In other words, we owe ourselves 25 percent of our debt and, if we are to reimburse that amount, we must find it elsewhere, either by borrowing it again to ‘roll the debt’ instead of borrowing to invest, or by raising taxes, or by cutting expenses,” they wrote.
The economists proposed instead that the ECB forgive the debts in exchange for the countries pledging to spend an equivalent amount on greening their economies and on social projects.
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