Sir, – Christine Lagarde, president of the European Central Bank, was technically correct last week when she said that it was not the job of the ECB to close the spreads between the Italian 10-year bonds and German bunds, which are debt securities issued by Germany’s federal government, and a measure of the risk attached to sovereign debt. However, the spike in the spread after her comments cost Italy €68 billion of savings.
Italy, giving its high level of public debt, is more exposed than others to the economic fallout from the coronavirus pandemic, and this will push the survival of the single currency to its limit. For this reason, calls have been made for an immediate emergency package to be put together for Italy from the euro-zone bailout fund.
Encouragingly, Ursula von der Leyen, president of the European Commission, has promised flexibility over EU deficit rules. The size and direction of this flexibility will be crucial, and perhaps it should reflect the urgency of the ECB’s €5 trillion quantitative easing programme designed to inject liquidity into the euro banking system following the euro crisis of 2008.
The coronavirus pandemic will push the survival of the single currency to its absolute limit. For this reason, Italy, the third-largest economy in the euro zone, needs European solidarity now. – Yours, etc,
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THOMAS POWER,
Lecturer in Economics,
Technological
University Dublin.