During its emergency meeting, the European Central Bank decided to pay additional compensation to heavily indebted countries. These countries, such as Italy and Greece, are becoming more and more expensive to finance their public debt. This could cause major problems in the long term or perhaps lead to a new euro crisis.
The central bank will borrow more from countries that pay higher interest rates. Recently, the ECB decided not to buy any more government bonds. The new loans would be bought with money from the loans that fell due. This was previously done through a distribution switch in all EU countries. This method bought many of the largest economies, but this principle has now been abandoned.
At the same time, the central bank will develop a new asset purchase program to further narrow the interest rate differentials between eurozone countries. This is sensitive because Northern European countries remember that the sole purpose of the central bank is to control inflation.
video link
All heads of European central banks, including Klaas Knot of De Nederlandsche Bank, attended the meeting via video link. This was the first emergency meeting since the start of the corona crisis in 2020.
In particular, the problems of Italy, Spain and Greece are getting worse. Interest rates in both countries have risen throughout the year. Last week in particular, the announcement by the European Central Bank that it would raise interest rates to curb inflation provided additional support.
Source: NOS
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