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Live Trading News > Blog > Politics > EU > ECB Launches New Attack on Sovereignty
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ECB Launches New Attack on Sovereignty

Shayne Heffernan Ph.D.
Last updated: February 7, 2021 8:17 am
Shayne Heffernan Ph.D.
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Mandatory Credit: Photo by ARMANDO BABANI/EPA-EFE/Shutterstock (10486301c) European Central Bank (ECB) President Christine Lagarde signs the new 20 Euro banknote in Frankfurt am Main, Germany, 27 November 2019. The signing of new euro banknotes is a traditional act that takes place at the beginning of each ECB presidency. European Central Bank (ECB), Frankfurt, Germany - 27 Nov 2019
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European Central Bank (ECB) chief Christine Lagarde on Sunday rejected calls to cancel debts run up by eurozone members to buttress their economies during the Covid-19 crisis as the ECB reinforce their new stranglehold on members.

The ECB has taken unprecedented steps to cushion the economic blow from the pandemic in the 19-nation euro area, launching a massive bond-buying scheme that has so far totalled 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 eurozone members by forgiving their debts.

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 ($3.0 trillion) — was now held by the ECB.

Image result for ecb communist

“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.

Lagarde, a former French finance minister, admitted that “all eurozone countries will emerge from this crisis with high levels of debt.”

But, she said, “there is no doubt that they will be able to pay it back.”

She forecast that 2021 would be a year of “recovery” but acknowledged that the eurozone would not return to pre-pandemic levels of activity “before mid-2022”.

In the meantime, she said, it would be “far more useful if the energy spent on demanding a cancellation of the debt by the ECB was spent on debating the use of the debt.”

“What will public spending be used for? In which sectors of the future should we invest? These are the key questions today,” she argued.

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By Shayne Heffernan Ph.D.
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Shayne Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 40 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.
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