Will the Pandemic Bring Down the Eurozone?

The pandemic could sound the death knell for Europe’s common currency.

As the coronavirus crisis subsides in Europe, another crisis may rear its ugly head again: the crisis surrounding the EU’s common currency, the euro. The euro crisis, which came to a head when Greece nearly defaulted in 2009-10, never really went away, and it could have profound consequences for the United States.

No eurozone government has openly declared insolvency during the coronavirus pandemic, but the European Central Bank has undertaken massive financial injections to avoid just that.

On top of this money printing, European governments have been spending like drunken sailors. Germany alone has committed €1.2 trillion in spending and guarantees, more than any other individual EU country. There is a real danger that German support for domestic firms undermines fair competition in the European Union, which its executive, the European Commission, is supposed to guarantee, although in this case it has remained silent.

Recently, European governments agreed to an additional €750 billion in COVID-related stimulus spending, dubbed “Next Generation EU,” which will add yet more to the burden already imposed on hard-pressed European taxpayers. The €750 billion will be borrowed on international markets — perhaps even from China —and jointly guaranteed by European governments, a development of considerable political significance in that it effectively represents a degree of debt mutualization that has thus far been resisted by the EU’s “north.” To pay back the jointly issued loans, the European Commission will be levying taxes directly, an encroachment on powers previously reserved to the members. With a “tax on non-recycled plastic waste” already levied on January 1, a “carbon border adjustment mechanism and a digital levy” may follow.

In Northern Europe, opposition to this spending scheme was firm, as governments realized the extra burden it would put on their national budgets already stretched by the measures taken in response to the pandemic.

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Πηγή: nationalreview.com

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