Will the Death of the Euro Lead to the Death of the EU?

The clock is ticking on the continuing existence of the EU.

 
The French president Emmanuel Macron recently fired a warning shot across the bow of the European ship of state. He said that without making all EU countries mutually responsible for the debts of individual countries, the EU could collapse.

In March, Christine Lagarde asked Eurozone finance ministers to consider a one-off joint debt issuance of “corona bonds” to assist with the coronavirus pandemic. But this has been met with opposition by Germany and other northern European countries since they do not want to be responsible for the debts of other more spendthrift nations of the EU.

Before the crisis, Italy had a 135 percent debt-to-GDP ratio. Despite having more than a decade after the crisis of 2008 to reduce its debt, Italy has consistently postponed dealing with the problem. Without pain or serious voter revolt, politicians will never take debt seriously and their countries will inevitably fail to reduce their debt.

This is also true of the US, France, Japan, or even the UK. If a central bank can increase the supply of loanable funds at will, interest rates can be kept artificially low for a very long time. Even before this coronavirus crisis, the ECB was buying up massive amounts of “quality” debt in the form of sovereign and corporate bonds. This lowering of the yield curves across Europe also lowered borrowing costs for countries like Italy. Without higher borrowing costs, there is no pain and thus no incentive to do anything about the debt.

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Πηγή: fee.org