Rising debt prompted European Central Bank to devise initiatives to bail out southern bloc states affected economically.To the point that this new plan may not be enough to help these nations noted experts
EU Support for US Sanctions Tanked the Bloc's Economy
The ECB's new bond reinvestment plan, revealed earlier this week to help financially challenged EU states, is likely to fail, according to Reuters and Bloomberg, referencing analysts, reported RT.
It devised the program to assist the EU's southern nations, which are the most accountable in the bloc, with increasing obligations.
The regulator stated that cash from maturing debt in the €1.7 trillion ($1.8 trillion) pandemic support scheme would be aimed directly at more indebted nations.
This means that ahead of the announcement, the process of buying ECB bonds by nations happened in conformity with each nation's investment. Preference would now be offered to countries with greater debt, such as Italy, whose debt level is approximately 150% of GDP, cited Azerbaycan 24.
Experts think that it will resolve the crisis. According to Reuters, Finland's Central Bank chief, Olli Rehn, the measure will help countries avert unnecessary market moves and will not help with truly massive debt issues, noted Zomaloma.
European Central Bank policies
Markus Ferber, a German member of the European Parliament, believes the European Central Bank is going too far with its expertise in its assistance to southern bloc states.
He added it's the ECB's function to deal with price stability; trying to keep favorable financing conditions is not. Furthermore, some countries just have had bad economic policies for years.
A central bank's core goal is to keep inflation in check, said financial analyst Richard Cookson. The European regulator seems to have a different plan in mind, trying to prevent the poorest EU members from departing the currency union.
He added the ECB, for the last decade, has been in an untenable position because it does not lessen inflation; instead, it wants to keep locked all weaker performing nations stuck in the currency union instead of solving its economic woes.
Cookson wrote in an outlet the institution is not concerned with inflation anymore.
He cited soaring inflation for most EU countries as an instance of the ECB's disastrous policies, asserting that even the announced recently 0.25 percent key rate hike, the first in 11 years, might make very little difference.
The financial analyst stated that the real agenda is hidden when rising prices are low, with high inflation making it hard to hide the real objective. It cannot lower inflation, and a more indebted state like Italy will find it more difficult.
Using rate hikes to control high prices is not wise, but when weaker borrowers are financed, that is more of a bad policy decision.
The ECB should not involve itself with indebted nations only getting worse, and it should not decide who is or isn't involved in the euro. Also, he stressed it is likely to be a make-or-break year for the currency.
How the European Central Bank is trying to help southern bloc states that in badly in debt, Cookson said it might not be helping at all if there is no real attempt to solve inflation.