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meIt was an interview that should cause a stir. “Europe must cancel Covid debt,” the Italian daily “La Repubblica”, a WELT associate newspaper, headlined in an interview with David Sassoli, President of the European Parliament.
The conversation with the Italian politician, which was printed last week, also raised the question of whether it was not time for a haircut for Italy.
In the interview itself, which was also published by WELT, Sassoli does not repeat this request, but explains that in principle it should be considered a haircut. “That’s an interesting working hypothesis,” he says cautiously.
It is not sure if the owner, much clearer, coordinated with him; in any case, the interview in Italy fueled the discussion about the country’s debt relief.
Critics complain of “cheaper populism”
Italian economists have been discussing their country’s debt relief for a long time, because state-funded aid programs in the Crown crisis are causing the already high national debt to rise to a previously unbelievable level. possible.
The European Commission expects the country’s national debt to reach 160 percent of economic output this year. In view of this fact, German economists also called for partial relief of the country’s debt in the spring at WELT AM SONNTAG.
However, the European Parliament has criticized this idea and Sassoli’s statements. “Considerations about a haircut for Italy are the cheapest populism and also extremely dangerous,” warns Green MP Sven Giegold. “Such statements separate Europe and Sassoli, as president of the European Parliament, should not participate in such destructive debates.”
The content of the discussion is not justified anyway, said the financial politician. There is no indication that ultra-low interest rates may rise again for the foreseeable future, and the low interest burden means that Italy’s national debt remains sustainable.
“Great Inflation” Warning
CSU MEP Markus Ferber said even a haircut could backfire. “When Sassoli asks for the cancellation of debts, he speaks out against an Italian default,” says the financial politician.
If Italy did that, it hoped it could have fun placing a bond on the financial markets again. “What we will see next will make the Greek sovereign debt crisis of a few years ago fade away,” says Ferber.
Hans-Werner Sinn, the controversial former president of the Munich Ifo Institute, also reacts sharply to Sassoli’s suggestion: “David Sassoli has made a stupid suggestion to trample on the Maastricht Treaty,” says Sinn.
All the money is in circulation because the central bank bought the Italian government bonds. If these papers are now undervalued, the purchase can never be reversed. “Money remains in circulation even when it is no longer needed. The result is, at some point, huge inflation, ”says Sinn.
In his opinion, a cut means that the holders of money, that is, all the citizens of Europe, have to pay the cancellation of the Italian public debt.
“Existential threat to the euro zone”
The CDU Economic Council is also alarmed by Sassoli’s statements. “Contrary to what Sassoli suggests, Europe and Italy are not miracle solutions. Rather, such demands should be a warning to fundamentally question the previous bailout policy, ”says Wolfgang Steiger, Secretary General of the Economic Council.
For years it has become clear that the catastrophic budgetary situation in Italy could quickly become an existential threat to the euro zone in the event of a new crisis. “Those who can rely on help in an emergency lose the incentive to avoid an impending financial emergency on their own,” Steiger says.
In the “La Repubblica” interview, Sassoli also fueled the debate on a European debt union. The occasion is the resolution of the EU heads of state and government at their marathon summit in July, which stipulates that the EU Commission must borrow 750 billion euros for aid from the EU crown. It is novel that the EU is incurring joint debts on such a scale.
In the immediate aftermath of the deal, Chancellor Angela Merkel (CDU) and other heads of government such as Dutchman Mark Rutte assured their constituents at home that the borrowing must remain a one-time event and in no way the beginning of a permanent debt union. But already in the weeks that followed, European politicians spoke out that they wanted to establish joint debt as an integral part of the EU.
A month ago, for example, Christine Lagarde, president of the European Central Bank, called for the Crown Reconstruction Fund to be permanent. And it was only in September that French Finance Minister Bruno Le Maire announced on WELT AM SONNTAG that the work of the reconstruction fund should be evaluated and then decided whether to keep the instrument.
France also wants to borrow jointly
France has always wanted common European debts and has used the outbreak of the crown pandemic and the economic crisis triggered by remote measures to promote the idea of Eurobonds, bonds issued jointly by EU countries. However, so far Paris has not been able to prevail.
The President of Parliament, Sassoli, now repeated Lagarde’s request. The joint loan must be made permanent, he said in the interview last week. His announcement wasn’t entirely surprising, but reactions came quickly.
“With this lawsuit, Sassoli blatantly shows that he sees the development fund as the first step towards the transfer union,” says Markus Ferber, spokesman for the conservative EPP group in the Economic and Monetary Committee of the European Parliament. “That has always been an Italian interest, and now some in Rome believe that the door has been opened a little by the corona pandemic.”
The dispute over the debt union divides Europe. Leading European politicians have categorically rejected the idea in recent weeks, such as Austria’s Federal Chancellor Sebastian Kurz.
Paschal Donohoe, the president of the Eurogroup, who has to mediate between the Euro Finance Ministers, did not want to commit to a position recently in a conversation with WELT. “We could discuss in Europe to keep this instrument,” said the Irish politician earlier this month. “But right now, the reconstruction plan is the answer to an unprecedented crisis, and everything else will tell in the future.”
Olaf Scholz praises Corona’s recovery funds
There are also voices within the federal government that can, at least in the medium term, certainly envision a communization of the debt. The most prominent representative is the Federal Minister of Finance and Vice Chancellor Olaf Scholz (SPD). In recent months, he has repeatedly spoken of the fact that borrowing alongside the Corona reconstruction fund in Europe is not a flashpoint related to the crisis.
“The reconstruction fund is a real step forward for Germany and Europe that cannot be reversed,” says the man who wants to be elected chancellor next year. He sees this as an important step on the way to the United States of Europe.
Scholz sees the former Secretary of the Treasury of the United States, Alexander Hamilton, as a role model, who in 1790 gathered the powers at the central government level, which in addition to the common income of the American states also included an independent borrowing capacity.
Green politician Sven Giegold is also fundamentally positive about the possibility of the EU incurring joint debts. “Collect taxes and write debts together and invest together; it basically makes Europe stronger, ”says the financial politician. However, much depends on whether the money is also spent wisely, and the reconstruction fund has yet to prove this before a common European fiscal policy can be thought about.
Assistance: Michael Höfling
