Nearly 150 economists - including France’s Thomas Piketty and Hungary’s László Andor - and political players - including Belgium’s Paul Magnette and France’s Aurore Lalucq (S&D) - have called on the euro area countries and the European Central Bank (ECB) to sign a “contract“ under which “the ECB undertakes to write off the public debts it holds (or to transform them into interest-free perpetual debts), while the States undertake to invest the same amounts in environmental and social reconstruction”, in an op-ed published on Friday 5 February in several European newspapers.
Currently, the public debts held by the ECB amount to almost 2,500 billion euros.
According to these economists, the Frankfurt Monetary Institute can allow itself to create money to compensate for these losses (Protocol No. 4 annexed to the Treaty on the Functioning of the EU) and, “contrary to what some institutional leaders, notably the ECB, claim, cancellation is not explicitly prohibited by the European treaties”. “Perhaps this would be ‘contrary to the spirit of the Treaty’, but was this not also the case with the quantitative easing sought by (former ECB President) Mario Draghi?”, they add. They stressed that “history has shown us time and again that legal difficulties fade in the face of political agreements”.
The signatories of the appeal emphasise that a cancellation of public debt to create fiscal room for manoeuvre is not enough by itself to make economic policy. They call for “further measures to reform debt and deficit criteria, environmental and solidarity-based protectionism, tax reforms to reduce the level of inequality and change behaviour, and a boost to public investment banks and reform of state aid rules”. “A new European governance, in particular through the transition to qualified majority voting (in the Council of the EU) in tax matters, must also be implemented”, they add. (Original version in French by Mathieu Bion)