No debt cancellation, warns Christine Lagarde

This is the little music that economists are playing at the moment: a hundred of them are asking to cancel the “Covid debt”. But Christine Lagarde, the president of the ECB, gave an end of inadmissibility.

The proposal is tempting: economists, including Thomas Piketty, have proposed canceling public debts held by the European Central Bank (ECB). The objective is to promote the rebound by investing in the social and ecological transition. But Christine Lagarde does not want to hear about it. In the Sunday newspaper, the President of the ECB is taking a position on the wrong side: the cancellation of the debt cannot be considered because it would constitute a ” violation of the European treaty which strictly prohibits the monetary financing of States. This is one of the ” fundamental pillars of the euro “. Rather, it calls for devoting the energy put on this issue to ” a debate on the use of this debt, it would be much more useful! What will public spending be allocated to? In which sectors of the future to invest? “.

High level of debt

Christine Lagarde agrees, “ all euro area countries will emerge from this crisis with high debt levels “. Nevertheless, she says she is certain that the States will be able to reimburse her. ” Debts are managed over the long term. Investments in key sectors for the future will lead to stronger growth », She explains. The debt must also be directed towards the sectors which will create innovation and jobs. A good part of it goes towards supporting companies whose economic model has run out of steam if we want to support the environment.

A highly anticipated year of recovery

Regarding the short term, Christine Lagarde assures that 2021 will be ” a year of recovery “. For her, the recovery was certainly delayed, but it was not “undermined”. And obviously, ” she is eagerly awaited “. This recovery will be ” job creator, and therefore unifying. We are moving towards another economy, more digital, greener, more committed to climate change and to maintaining biodiversity “, according to her. The President of the ECB warns, however: “ we will not return to the levels of economic activity before the pandemic before mid-2022 “.

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