The european central Bank has ruled out Tuesday the option of a cancellation of the debt of States that she holds in the portfolio, an idea suggested by some economists to cope with the impact of the pandemic of sars coronavirus.
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“I hear the debate, in France, on the cancellation of the debts held by the central bank, but this is not an option for the ECB,” said Fabio Panetta, a member of the executive board of the ECB, in an interview with the newspaper The World. Beyond the legal constraints prohibiting such a practice, “the citizens may lose confidence in the currency”, and it “would end in a mess financially,” says the central banker of italy.
This last one does not want to renew the experience of the Germany of the 1920s, a period of hyperinflation during which the citizens were to “be transported banknotes in wheelbarrows because the currency had lost its value”. “This is not the way to create prosperity”, and “it is for this reason that the treaties prohibit the monetary financing”, says Mr. Panetta.
A large debate in France
At a time when States in the euro zone should go into debt massively in response to an unprecedented recession caused by a pandemic of sars coronavirus, the ECB has increased by 600 billion euros of its emergency program to buy public and private bonds, originally endowed with 750 billion euros. However, the Treaty on the functioning of the EU prohibits a guardian institution of the euro to cancel the repayment at maturity of sovereign bonds it holds in its portfolio.
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The question of a cancellation of debt by the ECB has fed lately a large debate in France, the image of a tribune published in Le Monde on June 12, where a member of the european parliament and the six economists have advocated for the cancellation of the public debt redeemed since 2015 by the ECB, either 2.320 billion euros for the EU as a whole, including 457 billion euros for France, at the end of may 2020.
The national Assembly has rejected the beginning of June a proposal for a resolution of the France insubordinate promoting “the redemption of the public debt by the european central Bank”, the government is pointing to problems “economic and political” and a proposal “anachronistic”.
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