Escariva Criticized Guindos For Ensuring That Public Debt Relief Was “Illegal”
2021-02-06 | by CusiGO
On Friday, 100 economists launched a proposal in the country for the European Central Bank to cancel the precious debts of the countries of the monetary union, and the dispute continues. The ECB’s negative reaction was strong. Luis de Guindos, a Spaniard and vice chairman of the agency, was responsible for the official reply: “debt cancellation is illegal under the treaty. But it’s not just a legal issue. It has no economic or financial significance. ” Jos é Luis escriv á, Minister of inclusion and social security, sharply criticized his twitter account, saying: “it reminds me that 30% of the euro’s public debt is in the central bank, which reminds me of the word hypocrisy.”.
His comments were consistent with the information released by the agency before and after Friday’s forum signed by the economist Thomas piketty, Cristina narbana, chairman of the Social Democratic Party, and Nacho Alvarez, Secretary of state for social and economic rights. Since then, the ECB has insisted that this is illegal and counterproductive. In addition, some economists worry that if the debate is put on the radar of the government, it will make the northern countries reluctantly reconsider whether to adopt more ambitious policies to deal with the crisis.
Nevertheless, escaiv á defends the debate that the central bank is now totally rejecting. Jos é Manuel Gonz á lez Paramo, a former member of the Council of the European Central Bank, said in the country a few days ago that the measure was “legally impossible, politically destructive and its effect is very questionable”. Although he acknowledged that the proposal was “technically possible.”. That is to say, it can be achieved, but it will do harm to European construction. “The EU has successfully built confidence in issuing solidarity debt. Gonzalez Paramo added: “such a thing would shatter that confidence.”.
This is a recurring problem, which has aroused strong opposition in the organization. Moreover, this is not the first time a senior representative of the European Central Bank has come forward to address this issue. Article 123 of the Treaty on the operation of the European Union prohibits the European Central Bank from financing national budgets. It’s that simple. That’s what debt cancellation is like. In October, Christine Lagarde, President of the European bank, assured Le Monde that violating the treaty was not on my road map. “The simple answer is that we cannot cancel debt because the Treaty does not allow it. But despite legal problems, debt cancellation is generally not a good idea, “Philip lane, the agency’s chief economist, said a few days ago.
Guindos also pledged that cancelling the central bank’s balance sheet debt would mean that it would be difficult for the ECB to maintain the dividend flow it paid to Treasury bills, so cancelling the debt would ultimately affect the dividends governments received. But that’s not the only problem. ‘because a default would damage the reputation, credibility and independence of the central bank,’ Mr. Guindos said.
Other economists have been less severe in rejecting this view. They also don’t advocate debt relief. Paul de GRAUWE, a professor at the London School of economics, is an example: “as long as there are government bonds on the ECB’s balance sheet, it’s as if they don’t exist at all. If the ECB sells these securities to prevent inflation above 2%, problems will arise in the future, “he explained in an email. For deglauf, the question is not whether to cancel the debt, but whether the ECB will allow more inflation in the future, thereby reducing the real value of the debt. Who will pay for everything in this situation? “Investors who are stupid enough to buy 10-year bonds with zero or negative interest rates,” he replied.
However, the signers of the declaration found it necessary to start a debate. “This is a controversial proposal. But he pointed out the logic of thrift. Do you really think the debts of SMEs and self-employed persons guaranteed by ICO will be paid off? The first direct help will be this, “said Jordi Sevilla, a former socialist minister who was one of the economists accompanying picketti in the ideological struggle.