Debt Relief in Times of Need: The ECB as Lender of Last Resort for States?

Dirk Meyer ()
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Dirk Meyer: Helmut-Schmidt-Universität

Chapter Chapter 7 in European Union and Monetary Union in Permanent Crisis II, 2022, pp 113-143 from Springer

Abstract: Abstract The rise in debt-to-GDP ratios of eurozone countries has been recently accelerated by the Covid crisis. Without external aid, access to capital markets is threatened to dry up in the medium term, especially for Italy, but also for other Mediterranean member states. While the Pandemic Emergency Purchase Programme (PEPP) is being discussed as a violation of the ban on monetary financing of public expenditure, the “Next Generation EU” recovery fund is likely to steer the fundamental structures of the European Union (EU) towards a fiscal union with considerable transfer elements. A debt relief of the European Central Bank (ECB) via a European Debt Agency is critically discussed as a possible alternative. This construction allows, on the one hand, the legal integration into the EU treaties and, on the other hand, avoids a negative equity of the central banks. The question remains: under which conditions would this approach be assessed as suitable and proportionate?

Date: 2022
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DOI: 10.1007/978-3-658-38646-7_7

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