End of the euro? French plan to cancel debts blocked by panicked ECB

End of the euro? French plan to cancel debts blocked by panicked ECB

The ECB said “debt forgiveness is not an option” in a bid to fight the economic consequences of the coronavirus because “citizens would stop trusting the currency”. It comes after France suggested central banks could cancel debts to help world economies recover from the COVID-19 crisis.

But Fabio Panetta, member of the ECB’s executive board, said this was “not an option”.

He told Le Monde: “I hear the debate in France on the cancellation of debts held by the central bank, but this is not an option for the ECB.”

He said beyond the legal constraints prohibiting such a practice, “citizens would risk losing confidence in the currency” and that “would end in financial disorder”.

It comes after the ECB launched a pandemic emergency purchase programme (PEPP) with a package of €750 billion, which was increased by €600 billion on June 4.

When asked about the issues the ECB is tackling, Mr Panetta added: “We’re fighting against strong headwinds.

“So we need forceful measures to avoid the tightening of credit conditions, stabilise the economy and thus respond to inflation moving further away from our aim.

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“It must also continue to react forcefully to crises, through policies designed for the benefit of the euro area as a whole.

“And we, as a central bank, also need to live up to our responsibilities, acting decisively as we did in this crisis, and providing a liquidity backstop to holders of liabilities in euro in phases of turbulence.”

It comes after Nigel Farage said he was certain Italy would be the next EU member state to unshackle itself from the bloc.

In an interview with affaritaliani.it, Mr Farage said being part of the EU and the single currency “does not bring any benefit to your country”.

He said: “After the COVID-19 emergency, western countries’ politics are going through a phase of profound instability.

“What is certain is that any aid measure from Brussels to solve the Italian economic crisis will not bring stability.

“I don’t know when exactly, I don’t know at what point, certainly not tonight, but in the end, Italy will leave the European Union as we did.

“It might take years, but it will happen.”

Additional reporting by Maria Ortega 

Published at Wed, 17 Jun 2020 13:53:00 +0000