almost 4 years ago • 2 mins
The EU faces a bigger existential threat than Brexit as it battles the pandemic’s economic effects. Half the 19 euro-using “eurozone” countries – led by France, Spain, and Italy – are calling for the creation of a temporary $1 trillion-plus fund that could issue cheaper, shared bonds and raise cash for those most in need.
But the rest – led by Germany and the Netherlands – are loath to risk further economic integration with their already more heavily indebted neighbors. They point instead to an existing $440 billion available for individual countries to borrow. Problem is, the stringent conditions attached – such as future budget restrictions – are political poison back home, particularly in Italy 🤢
Hit particularly hard by the virus, Italy is already preparing to increase its national stimulus package – but even that may not be enough…
The EU was criticized for its slow initial economic response to the coronavirus – and more action may soon be needed. By some estimates, existing measures will have to be doubled just to help individuals and businesses survive the coming months.
Ten years ago, a eurozone debt crisis resulted in the creation of the $440 billion fund – but also humiliating bailouts for countries like Greece. Unless the EU finds an adequate way to meet its members’ wants and needs this time around – by softening the strings and stigma attached to loans, for example – an imminent Italexit (at least) looks likely.
Regardless of the solution, one thing is certain: post-coronavirus, European economies, like the United States – which, 230 years ago, resolved similar arguments over joint debts with the creation of the US Treasury – will face the challenge of getting back to growth while dealing with sky-high debts… 🙄
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