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Corona virus will inflate the EU bad debt, and banks need to protect themselves

June 10, 2020

The European Central Bank (ECB) may fear default. Rumors are circulating that he plans to invest at least half a trillion “bad debts” in a “bad bank”.

As reported by Reuters on June 10, citing two people familiar with the matter, The ECB now wants to quarantine its “financial waste”.

ECB praises “helpful” wealth management companies

The reason is, according to sources Rising unemployment can increase the risk of a massive default on debt obligations.

Corona virus will inflate the EU bad debt, and banks need to protect themselvesCorona virus will inflate the EU bad debt, and banks need to protect themselves

Even Without the rise in unemployment among corona viruses, the euro zone already has $ 500 billion in debt that is unlikely to be repaid. This includes credit cards, loans, and mortgages, Reuters notes.

The ECB refused to confirm the plans. which he had considered but dropped a few years ago.

A “bad bank” would allegedly protect other fragile lenders from the economic misery associated with the corona virus. It could take the form of an asset management company, which an ECB spokesman seemed to be in favor of when asked this week.

“”I have been very supportive of wealth management companies. I think they are usefulBank boss Andrea Enria said at a press conference.

On the subject of bad banks, Enria added:

“Many of these programs ended in black and made profits.”

Federal Reserve balance sheet as of June 1, 2020

Federal Reserve balance as of June 1, 2020. Source: Federal Reserve

The Federal Reserve is preparing to comment on the impression of historical money

The plans follow the fact that the ECB has doubled its stimulus measures against the corona virus to € 1.35 trillion. In the United States this week, The Federal Reserve will meet to develop a plan to deal with the economic consequences of the crisis.

The Federal Reserve has had no precedent in printing money since March;; Cointelegraph found that its balance now stands at $ 7.16 trillion, an increase of $ 3 trillion in three months.

An analyst spoke to the Financial Times and said so The market was “hungry for guidelines” from the Fed, fearing a second wave of coronavirus infections and this paradoxical laissez-faire attitude towards the social distancing that the authorities took during the ongoing protests in the United States.

Increasing debt is one of the main arguments for “hard” money like Bitcoin (BTC). Central banks’ ability to print money without backup is an impossible idea for the largest cryptocurrency, since if they agreed, network participants would have to accept an impairment of their own savings.

Fiat inflation is in stark contrast to the decline in Bitcoin supplywhat an analyst compared this week to a flattened coronavirus infection curve.

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