The European Union’s coronavirus “rescue” deal is really just a €500 billion increase in debt which could ultimately “make the problem worse,” former Wall Street stockbroker Max Keiser told RT.
The EU agreed on a breakthrough €500 billion rescue package for countries hit hardest by the Covid-19 epidemic on Thursday, having failed to come to an arrangement earlier in the day.
The agreed upon half trillion is significantly less than the €1.5 trillion the European Central Bank had said the bloc might need to deal with the fallout from the pandemic – and it may not even do the trick at all.
“This added debt will ultimately make the problem worse. Debt is the primary problem, so adding more debt won’t solve the problem,” Keiser, who hosts the Keiser Report on RT said.
The EU said the money will be spent to “support domestic financing of direct and indirect healthcare, cure and prevention related costs due to the Covid 19” – but what about the non-health-related costs, like lost jobs and shuttered businesses?
“When governments try to pick winners, instead of the free market, the result is always an unfortunate mess,” Keiser said, adding that governments should address the problem of adding debt to debt first.
The deal stopped short of backing a call from Italy and France to create so-called “coronabonds” – a joint borrowing instrument whereby the whole EU would underwrite the debt of a member state.
Germany, the bloc’s strongest member economically refused that proposal, indicating that richer members who could weather the crisis better are moving away from the idea of propping up poorer ones. Rejecting the proposal of pooled debt, Chancellor Angela Merkel said there are “so many other ways to show solidarity” with European neighbors.
The concept of a separate borrowing instrument to support the worst-suffering countries would just be another instance of governments adding more debt and trying to “outsmart the market” by picking winners at the same time, which is “doubly-bad,” Keiser said.
Europe’s financial “rescue” deal comes after European Commission President Ursula von der Leyen apologized to hardest-hit Italy last week for the lack of “a common European response” as the virus ravaged the continent and crippled economies. Indeed, Brussels’ decision to initially leave countries like Italy in the lurch has prompted speculation that the bloc itself may be an ultimate casualty of the pandemic.
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