EU leaders have reached an agreement on a recovery fund with a scale of 750 billion euros (about S $ 1.19 trillion), which aims to aid members with the most serious impact of the coronary virus epidemic.However, in the long negotiations around this recovery support, people are increasingly aware that the European economic crisis caused by the epidemic is actually the extension of the continuous worsening euro crisis since the Lehman brothers went bankrupt in 2008.
In essence, this is a competitive crisis caused by the distortion of relative prices in the euro zone, and this distortion is the result of excessive inflation pricing in southern European countries.This high pricing stems from the capital flood that these economies appeared after joining the euro zone.
After the financial crisis in 2008, the euro bubble broke, which reversed the direction of private capital flow, which led to several rounds of fled from various countries along the Mediterranean coast to Germany.This is reflected in the so -called pan -European real -time automatic liquidation system (referred to as target). The balance is measured by the balance of net payment instructions and provided some public overdraft credit in the euro area.At present, the crown disease epidemic has triggered another stage of capital escape, and its scale is unmatched by all other stages.
After the outbreak of the epidemic at the beginning of this year, international lenders generally rejected the exhibition period of the unpaid loan of South European countries and requested to repay on time, and then invested funds to invest in a member of the northern part of the euro area headed by Germany.Southern European investors will also transfer investment to Germany and transfer the corresponding amount of funds.These two turbulent payment instructions forced the German Central Bank to carry a huge unpaid credit amount that has reached 1 trillion euros.
In March 2020, Germany's Target's claims increased by 114 billion euros, the largest monthly increase since the establishment of the euro in 1999.Capital escape during the last two euro crisis (September 2011 and March 2012), which also caused the German Target balance to surge, but only 59 billion euros and 69 billion euros, respectively.Although the capital market has cooled from April to May this year, Germany's Target's claims rose again in June, an increase of 84 billion euros.Between February and June, these claims increased by 174 billion euros, making the total amount reaching 995 billion euros.
Instead, the Target debt in Italy and Spain increased by 152 billion euros and 84 billion euros during the same period.This means that the total debt of the two countries as of the end of June reached 537 billion euros and 462 billion euros, or a total of 999 billion euros.This number and German debt numbers are so close to the threshold of 1 trillion euros, so that people can't help asking what secret forces behind they are in the emergency brakes.
Investors escape from Spain and Italy because they no longer regard these countries as security investment goals, and the central banks of the two countries have made such escape possible through the additional liquidity provided by their own banknote printing machines.
Part of this liquidity comes from various asset purchase plans from European Central Bank, including the Pandemic Emergency Purchase Program and the long -implemented asset purchase plan (Asset Purchase Program).These plans have been temporarily expanded.Although these plans are imagined that the European Central Bank and the central banks of the European Union will decentralize the purchase of various types of assets, these institutions have purchased too huge Italian assets.
The additional liquidity also comes from the total amount of more than 500 billion euros, and the European Central Bank's special targets provided by the European Bank of China in mid-June Long-term Targeted Longer-Term Refinancing Operations program.The plan provides a very preferential -1%interest rate. The interest rate is so preferential that after many banks borrow this money, they immediately deposit it into the central bank with a interest rate of -0.5%.This provides them with arbitrage income that can be obtained immediately, which is equivalent to public subsidies from the euro system.
However, to a large extent, banks in Spain and Italy need long -term refinancing operations for special goals to make up for capital outflows, or they just use them to repay those foreign private loans with less favorable conditions.In this case, the loans provided by the Spanish and Italian central banks through the national (electronics) banknote printing machine will not only lead to capital escape, but also drive private capital by providing more preferential loan conditions.
Nevertheless, the euro zone is still unbalanced.This can be clearly displayed from the production of manufacturing in South Europe.Unlike domestic departments, manufacturers in the region must compete internationally, so higher prices have the greatest impact on them.Even before the coronary virus crisis, Italy's manufacturing output was 19%lower than the level of reaction before the real economy responded to the financial crisis, and Spain fell 21%.This decline continued during the epidemic, so that the output gap has been expanded to 35%and 34%, respectively.
The EU's newly established recovery fund aims to alleviate this suffering, but funds cannot solve the problem of distorted products in the euro zone.To solve this problem, you still have to implement public or actual depreciation, but no one is willing to talk about this.On the contrary, the European Union's strategy seems to be based on hope and prayer.
(The author Hans-Werner Sinn is a professor of economics at the University of Munich, former director of the IFO Institute of Economics, and a member of the German Department of Economic Affairs.
