Local view for "http://purl.org/linkedpolitics/eu/plenary/2011-11-16-Speech-3-076-000"
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"en.20111116.5.3-076-000"2
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".
The agreement of 27 October is flabbergasting. The austerity policies that it intends to include in the constitutions will plunge Europe into a recession where tax revenues will dry up and deficits will widen. They will increase the risks associated with holding sovereign debts, leading to higher interest rates. The banks will see their balance sheets deteriorate and will struggle to increase their capital. Only the European Financial Stability Facility (EFSF) would allow for a restructuring of debts and recapitalisations and defuse any new tension about rates. To do so, it would have to turn into the embryonic European Treasury, issuing Eurobonds which the European Central Bank (ECB) could buy back at a lower rate. There are no plans for this. The fund, which started off with EUR 440 billion, now only has EUR 250 billion. To raise the EUR 1 trillion supposed to reassure the markets, it will transform the sovereign debts held into derivatives to activate the ‘leverage effect’. However, the recession will increase the risk of defaults. We hardly dare imagine the effects of this securitisation of Italian and Spanish debts should these countries partly default. This agreement is explosive for the financial system, already under threat from austerity measures which are crippling growth. Turning to China rather than the ECB is detrimental to industry and employment in Europe."@en1
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