Monday, 8 Mar 2021

Eurozone coronavirus crisis: Panicked EU claim outbreak could destroy the single currency

The single currency is under “enormous pressure” following the coronavirus outbreak, according to a leading economist. The eurozone economies could collapse if the coronavirus continues to spiral out of control in Europe. Economist Liam Halligan said the struggle to “contain” the eurozone collapse is “the biggest economic question in the world” right now.

Speaking to the BBC’s Politics Live, he remarked that no-one had understood how grave the situation was for the single currency.

He explained: “A big story is what is happening on eurozone bond markets. It sounds crazy but it is completely true. The single currency is under enormous pressure.

“Italy and the Italian economy has collapsed. Can the ECB contain eurozone bond markets?

“It is probably the most important economy question in the world.”

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On Thursday, ECB chief Christine Lagarde sparked economic panic across Europe after she refused to say whether Europe’s central bank would stop economies sliding into recession.

Instead, Ms Lagarde said it was the responsibility of governments to act to support growth.

Following this, investors dumped Europe’s bonds and stocks en masse, leading to the biggest drop in European stocks on record.

The euro headed for its worst three-day drop since 2016.

European Commission President Ursula von der Leyen tried to backtrack Ms Lagarde’s remarks, claiming the EU would do “whatever necessary”

Peter Chatwell, head of European rates strategy at Mizuho International Plc, remarked: “I didn’t realize the ECB’s primary mandate was to cause a bond market crisis.”

Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics, said Lagarde’s comments “will go down as a catastrophic failure”.

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The European Commission chief unveiled a £33bn EU rescue package for those affected by coronavirus.

Mrs von der Leyen told repoters: “We are absolutely ready to help Italy with whatever is necessary.

“Whatever they need, we will answer. And they will be hit by the crisis that follows Coronavirus.

“We will help the Italian people and the Italian government. We are all, in this moment, Italians.”

Eurozone finance ministers also agreed a “very large” policy response to fight the economic fallout of coronavirus, saying the bloc will unleash the “full flexibility” of its budget rules to boost spending. 

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