Politeia, December 3, Robert Lyddon
The EU’s pandemic recovery programme with its invisible liabilities poses risk to the global financial system, says Bob Lyddon. If risk is to be recognized and managed, global regulators must act to oblige more transparent accounting systems.
The EU’s invisible liabilities – Rising debt, greater risk. The Eurosystem’s balance sheet now shows that its assets of €12 trillion exceed the Eurozone’s 2020 GDP of €11.4 trillion. This is attributable to the emergency response to Covid by the European Central Bank (ECB), who both created the Pandemic Emergency Purchase Programme (the PEPP), extended the programme of unsecured loans to banks called Targeted Longer-Term Refinancing Operations (TLTRO), and relaxed associated qualification criteria. While the amounts in play have risen, the standards being applied at source by EU authorities have weakened, and there is an absence of consolidated accounting: the total financial liabilities of EU and Eurozone member states are invisible/to global financial markets. This therefore represents a risk to global financial stability.
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