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Economists fear a new euro crisis
The | Reading time: 2 minutes.
Debt in the euro zone will hit a record this year
Source: Picture Alliance
The cost of the pandemic is tearing up government budgets in Europe. Debt hits a new record, Italy in particular is concerned. Economists are already discussing a haircut.
DAccording to leading economists, the euro zone faces a new test. The reason is the drastic increase in public debt as a result of the Corona crisis. “There is a risk of a euro 2.0 crisis,” Lars Feld, chairman of so-called economic practices, of the expert council for the assessment of overall economic development, told WELT AM SONNTAG.
Italy’s debt burden is particularly concerning. “This may trigger a new sovereign debt crisis like that between 2010 and 2012,” says Paul de Grauwe, an economist at the London School of Economics.
The European Central Bank (ECB) is stabilizing the markets by buying government bonds. “The ECB’s programs and the possibility of easier access to the ESM protective shield currently provide the certainty that member states will not have any financing problems,” said Feld.
“Dangerous bubbles in the real estate markets”
But this is increasingly criticized. “The ECB is increasingly becoming a cleaner for financial policy,” says Jörg Krämer, chief economist at Commerzbank. In doing so, they put to sleep the will of politicians to reform. “And it encourages the formation of dangerous bubbles in real estate markets.”
Therefore, economists are increasingly thinking about a haircut. Italy’s debt ratio in particular must urgently decrease, says Clemens Fuest, president of the Ifo Institute in Munich. “So there is a lot to be said about a haircut in a few years.” This should be organized in such a way that there is no banking crisis. “However: someone has to bear the burdens.”
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