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COVID-19 Plunges Eurozone Into Crisis With European Currency on Verge of Exploding
from Sputnik News:
BRUSSELS (Sputnik) – The coronavirus pandemic is now challenging the core European taboo under the European Treaty, the issuance of eurobonds, but as the situation becomes increasingly dramatic, EU member states are feeling the need for the strongest of medicine to get over the looming coronavirus-induced economic crisis.
On Thursday, the heads of European states held a teleconference organised by the European Council in an attempt to find solutions to avert an economic slump following the shutting down of Italy, Spain, and France’s economies.
Mario Centeno, Portugal’s finance minister and president of the Eurogroup, said that the main goal of Brussels in the wake of the COVID-19 crisis was to set up new “lines of defence” for the euro.
“Our aim is to add new lines of defence to the euro, preventing this economic crisis from morphing into a financial one. This is what will be at the #Eurogroup table this evening”, he tweeted before the teleconference.
Our aim is to add new lines of defence to the euro, preventing this economic crisis from morphing into a financial one. This is what will be at the #Eurogroup table this evening pic.twitter.com/XwFA1aBHrL
— Mário Centeno (@mariofcenteno) March 24, 2020
At the same time, Paul De Grauwe, a professor of European political economy at the London School of Economics and one of the most respected economists in Europe, made a shocking declaration, saying he is “very pessimistic about the future of the euro“, and that “the Eurozone might blow up”.
Of course, European Commission President Ursula von der Leyen communicated the importance of the issue for all Europeans. She even conscientiously washed her hands on camera, humming Ludwig van Beethoven’s “Ode to Joy”, Europe’s official anthem.
“When Europe really needed to be there for each other, too many initially looked out for themselves. When Europe really needed an ‘all for one’ spirit, too many initially gave an ‘only for me’ response. And when Europe really needed to prove that this is not only a ‘fair weather Union’, too many initially refused to share their umbrella”, she said when delivering a speech at a European Parliament plenary session on Europe’s coordinated response to the COVID-19 outbreak.
EU states now need to make decisions to inject enough liquidity in the market to save companies from bankruptcy and the domino effect it would trigger for banks if their loans are not reimbursed, as well as for a high number of small- and medium-sized enterprises and private consumption of citizens, whose revenues are dwindling even if they have not lost their jobs.
For the European Central Bank (ECB), its President Christine Lagarde has already announced a purchase of European bonds worth 750 billion euros ($837 billion) by the end of 2020, but according to many economists, the need is much greater, especially in the worst-hit countries like Italy and Spain, which are also the most indebted. Meanwhile, Germany, the Netherlands, and the Nordic member states still refuse to wipe out the very large legacy debt of these countries.
Possible Blow-Up of Eurozone
While European Commission President Ursula von der Leyen speaks of an “all for one” spirit, Germany and other countries that have always respected the Maastricht Treaty, like Austria, the Netherlands, and Luxembourg do not want to pay for those who did not follow the rules, run annual deficits above 3 percent, and have a consolidated debt of much more than the 60 percent allowable maximum.
The bad pupils in the class are Greece, which is a desperate case, but also Italy, Spain, Belgium, and even France who only adhered to the Maastricht criteria for two years after their implementation in 1992.
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