The European Central Bank disqualifies as “illegal” and “meaningless”, the debt forgiveness proposal supported, among others, by the president of the PSOE, Cristina Narbona, and the economic manager of Podemos, Nacho Alvarez. “Debt cancellation is illegal under the treaties, but I would like to point out that it is not just a legal issue or that it is against treaties. Debt cancellation makes no economic or financial sense at all.” This is how the vice-president of the ECB has come out, Luis de Guindos, during his speech at an event organized by LSESU German Society. ECB sources indicate that the position presented by the former minister of the Government of Mariano Rajoy represents the institution chaired by Christine Lagarde.
Narbona and Alvarez are part of the hundred economists, including Thomas piketty, which request that the ECB forgive the sovereign debt that has accumulated with the pandemic and in previous years and that in the case of Spain is around 300,000 million euros, 25% of the Gross Domestic Product. According to De Guindos, not only would it undermine the European Treaties, but it would also weaken the important dividends that central banks, including the Bank of Spain, bring to the Eurozone Member States. PSOE sources indicate that Narbona endorses the idea “in a personal capacity” and the Ministry of Economy has not initially commented. The Secretary of the Economy of Podemos has claimed on his twitter account that “25% of the debt in the Eurozone is in the hands of the ECB. We owe it to ourselves. ? A hundred economists propose to cancel this debt in exchange for the countries facing equivalent investments in ecological and social reconstruction. “According to the distribution keys of the ECB, Germany and France would be the most affected by a debt cancellation.
According to the technical explanation provided by De Guindos, collected by Europa Press, from a short-term accounting point of view, debt forgiveness may mean a relief in the government’s public debt ratio, but over time, it would affect to the dividends obtained and an accounting equivalence may occur with an effect perhaps greater than that of cancellation.
“This debate on debt cancellation I think is detrimental, because in the end the governments would not gain much and at the same time the reputation, credibility and independence of central banks would be greatly affected “, has warned.
The proposal of Piketty and other signatories is that a contract be signed between the European States and the ECB, whereby the monetary institution cancels or, at least, converts the debt into perpetual and interest-free. In return, the beneficiary states would commit to invest this money “in ecological and social reconstruction”.
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