It is out of the question to cancel Covid debt. In an interview with Journal du Dimanche released this February 7, 2021, European Central Bank chief (ECB) Christine Lagarde said that cancelling this debt is “unthinkable” and would be “in violation of the EU Treaty which strictly prohibits monetary financing”.
“This rule is a fundamental pillar of the common framework underpinning the euro” she insists on, before adding: “Rather than expending so much energy asking for debt to be cancelled, it would be much more worthwhile to focus instead on how this debt should be used, on how public funds will be allocated, on which sectors we should invest in for the future. Those are the things we should currently be talking about”.
For the record, over 100 economists called in – in an opinion column released on February 5 – for cancelling the public debts held by the ECB in order to make social and ecological recovery easier once the Covid-19 pandemic is over.
According to Lagarde, “all eurozone countries will emerge from this crisis with high levels of debt”. But “there is no doubt that they will be able to pay it back. Debt is managed over the long term. Investments made in sectors that are vital for the future will bring stronger growth” the ECB chief thinks considering “the recovery will create jobs and will therefore have a unifying effect. We are transitioning to a different economy, one that is more digital, greener, more committed to combatting climate change and to protecting biodiversity”.
Still in JDD, Lagarde forecasts economic recovery for the European Union by the middle of the year. “2021 will be a recovery year. The economic recovery has been delayed, but not derailed” she says. Yet, she remains cautious: “We are not immune to unknown risks surfacing. […] we will not see a return to pre-pandemic levels of economic activity before mid-2022”, she warns.
