Frankfurt am Main
European Central Bank chief Christine Lagarde said Wednesday she was “not overly concerned” that the coronavirus pandemic could renew fears of the eurozone breaking up, after a report from the Frankfurt institution highlighted the danger Tuesday.
“I’m not overly concerned about it” although “policymakers will have to continue watching” mounting debt levels in the eurozone as governments borrow to cushion the coronavirus’ effects, Lagarde said in a video stream addressed to the single currency bloc’s young people.
In a twice-yearly financial stability report, the ECB had warned Tuesday that rising debt could increase perceptions of “redenomination risk” — the danger of some countries quitting the euro or the single currency collapsing altogether.
While Lagarde acknowledged that “some countries will be more affected than others”, she issued a firm “no” when asked if the pandemic could renew the danger of the eurozone breaking up.
“All countries around the world had to increase their debt” which was “the right thing to do,” the former French finance minister and IMF chief said.
She noted that historically low interest rates at present make the cost of servicing debt “remarkably low”.
“What it will be spent on is what really matters,” Lagarde said, arguing investments to “transform our economies” towards digitalisation, productivity and combatting climate change would pay off in the long run.—AFP
