The European Central Bank (ECB) is printing money like crazy in response to the coronavirus. It is creating up to €750 billion to purchase government bonds (to prevent indebted Eurozone states from going bankrupt) and up to €3 trillion to incentivise banks so they lend money to companies and maintain liquidity in the economy. This is around 36.5% of Eurozone GDP.
Money is just information in a computer, so the ECB is ‘solving’ the economic coronavirus problem by cooking the books and pretending that the Eurozone produced an additional 36.5% GDP this year. They are limiting inflation (and the effectiveness of their stimulus) by making sure that the money isn’t spent directly into the economy but is introduced as loans to companies through banks.
The ECB is allowing banks to borrow from the €3 trillion stimulus at a negative interest rate of -0.75%. That’s right, banks are being paid to take stimulus money so they can lend it to businesses and individuals at a profit. The ECB had an incredible opportunity to cook the books in the public interest, and they somehow decided that the right thing to do is to pay the banks and get the rest of us into further debt.
The nurses, doctors, delivery people, shop attendants and countless others risking their lives to keep us healthy, fed and comfortable are the main heroes of this crisis. Many of them have been working for decades in sectors strangled by competition, declining labour conditions and stagnating pay.
The ECB could have provided debt relief and improved labour conditions and salaries in these and other sectors. They could have set up a fund, helped our transition to universal basic income or given money directly to companies and individuals. Instead, they gave us debt.
I expect, once this crisis is over, that we will be warned about these debts and told that we need to tighten our belts. Can you see it happening? The people on the frontlines, already suffering, will be told that the coronavirus ‘was bad for the economy’ so they cannot have better wages and working conditions. There may even be a need for further austerity measures. This could lead to mass protests, with huge public support, against our ruling elites.
I don’t think that we can go back to business as usual once this is over.
The world is shifting, and coronavirus is just the beginning.
Constantijn van Aartsen, PhD Candidate, Private Law