Coronavirus: ECB buying 870 billion in bonds
To combat the economic repercussions of the coronavirus pandemic the ECB has announced plans to spend another 750 billion euros on bond purchases. This comes after last week's announcement that it would invest 120 billion euros in bond-buying. The measure is aimed at lowering the interest rates at which states and companies can borrow money. Is this the right response to the crisis?
A great moment for Europe
The taz praises the ECB's strategy:
“Now the fight against the virus won't fail for lack of money. This also applies - most importantly - to Italy and Greece. ... Italy, in particular, has fallen into a vicious circle: no other EU country has been so badly hit by the coronavirus epidemic, yet the government in Rome didn't dare to increase its budget because it was afraid of spiking interest rates. The Italians were planning to spend just an additional 25 billion euros - while Germany has long since reckoned with 'unlimited' corona-related costs. Italy would have been plunged into poverty if the ECB hadn't intervened. ... The ECB has done everything right. It has created the economic framework for policymakers to act. This is a great moment for Europe.”
Don't use up all the ammunition
Deutschlandfunk is sceptical and questions whether the European Central Bank is really in a position to set the key accents:
“The ECB should have carefully observed the response to its first package a week ago: it was zero - despite the promise of bond-buying to the tune of 120 billion euros. ... In addition to the healthcare system and the scientific community, it is the governments that are called upon to take action, and are already putting together massive aid packages. The crucial question is whether the central banks are not depriving themselves of the ammunition they will urgently need in the 'post-hell' period of the corona crisis. Because then they could be faced with faltering banks sitting on bad loans and a potentially major financial crisis. ... Will the ECB be able to react then? Perhaps not.”
No permanent change of course
Il Manifesto doubts that the ECB will abandon its neo-liberalist creed:
“Apart from the fact that it is not clear into which pockets the money will eventually flow, one wonders whether belief in the market's ability to regulate itself, in its miraculous virtues and the dogma of currency neutrality will be restored after this. ... But won't the Governing Council, which is contradicting its president and urging her to engage in a public mea culpa, look like a pathetic adept of homeopathy accusing a doctor of not having given a cancer patient a strong dose of chemotherapy and thus causing his death? ... Lagarde, unlike those who accuse her of incompetence, has only shown that she is completely in line with the doctrine on which the monetary union is based. She is the priestess of liberalism.”
Break taboos now
Economist Pascal Perez calls in Le Monde for the central banks to unbureaucratically distribute "helicopter money" in the form of permanent loans of 2,000 euros per household:
“This makes it possible to finance demand instead of salaries and social redistribution. It reduces competition between national social systems. It compensates for the money that is not being spent because of the drop in the mobility of goods and people and increased fears about the future. This would be more useful than the Central Bank buying government or corporate bonds, because an impoverished household spends money, while a large company that borrows money at zero interest buys up shares or competitors. ... In a context where the failure of macroeconomic solutions can lead to chaos, unconventional measures to save the economy must be allowed.”