The US star economist Nouriel Roubini has warned of a collapse of the euro zone as a result of the coronavirus crisis. “The danger comes from Italy,” Roubini told “Wirtschaftswoche” today. With a national debt of 170 percent of the gross domestic product (GDP) for 2021, the country is “practically insolvent” and at the same time too big to go bankrupt and to be saved.
According to the newspaper, the 62-year-old economist expects a new struggle for the survival of the euro, as in the times of the Greek crisis. However, Italy is “a ten times bigger problem than Greece”. A rescue mechanism is necessary for the euro zone to survive.
Appeal for aid instead of credit
Regarding the Franco-German plan for a 500 billion bailout plan, Roubini said: “The fund is smaller than Italy, Spain and Greece had hoped for.” It would be positive “if most of the disbursements become subsidies instead of loans”.
According to the ideas of German Chancellor Angela Merkel (CDU) and French President Emmanuel Macron, the EU Commission should take out loans for the fund on the financial markets on behalf of the EU. The money will then flow as non-repayable grants from the EU budget to the EU countries most affected by the coronavirus crisis, including Italy.
However, the group of “economical four” from Austria, the Netherlands, Denmark and Sweden strictly rejects this. They only want to help with repayable loans and make structural reforms a condition for payments. The four countries also consider the volume of 500 billion euros to be exaggerated.