As everyone is told by virologists and politicians. the world and Europe are only at the beginning of the corona crisis. Significant here is also news that already heralds a somber omen of further development and is reported on the sidelines, probably also in order not to depress the population too much and possibly even produce panic beyond the usual reports of hamster purchases.
On the one hand, it was striking that NTV put the usual news in a loop, but that you could read as undertitles “looting in southern Italy”, “southern Italians threaten with” storming the palaces “,” secret services warn of social unrest “. One wondered who the southern Italians were, a mass movement, political organizations of the right or left, the mafia, who tried to take advantage of the discontent and whether the alleged storm on the palaces was an appeal not just to storm the villas of the rich or the wealthier , but also to storm northern Italy or government buildings and to carry out a coup d’état or a looting orgy. Interestingly enough, this was no longer reported in the public media, as well as on NTV itself and the other media. Usually, NTV is not known to produce fake news.
The second news was that Hessian finance minister and possible successor prime minister Schäfer committed suicide, apparently threw himself before a train because of the corona crisis. A commentator hushed this situation into perspective. Schäfer was a hard-working financial expert and crisis solver, who also actively promoted the blueprint for the then hopeless debt relief of the municipalities and communities, and other family reasons are also possible. Nevertheless, the suspicion remained that a recognized financial expert in the face of the coming massive economic and financial crisis considered it so hopeless and threatening that he lost all courage and confidence and killed himself because of depression.
An economic and financial crisis as a result of the corona crisis is also very likely. The current black zero, the austerity policy and the Maastricht criteria will no longer be sustainable. The economic stimulus programs, the rescue packages and economic aid can only be financed through immense new debts. The ECB under Lagarde has also announced Whatever it takes to save the euro ala Draghi, as it did in the 2008 financial crisis. The discussion has now started about corona bonds, in fact, Eurobonds through the back door, which would bring about a communitization of debts, a European debt union in which the richer countries, especially Germany, the Netherlands and the northern states, are liable and, if necessary, would have to pay for the southern countries. This may not work without debt relief or haircut, which could also trigger a currency reform or a financial crisis that takes the form of a new euro crisis.
France, Spain and Italy are now pushing for Corona bonds, the Greens European group supports this, while the German government, the Netherlands and the more financially strong countries have so far refused. Macron has now, after declaring NATO “brain dead”, questioned the EU’s right to exist and its benefits if the debt union were not Europeanized. This can also give the AfD and the Front National a boost. The AfD will explain that the Southerners wanted to enrich themselves at the expense of the German and richer countries, that the honest taxpayers would be looted with their bank balances and national budgets. The Front National would either argue that the Germans are abandoning the French and that no help is expected from the EU, or if the corona bonds do come about, that Germany would establish the financial hegemony over Europe and by the means of austerity policy destroy the French welfare state and exploit the honest French taxpayer and put France and Europe under a debt yoke.
It will be interesting to see whether this line of reasoning will be accepted, because while at the last euro crisis it was morally argued that the Greeks and Southerners were a lazy people who lived above their means, a few years have passed with austerity programs and the rapidly declining living standards of these populations, unlike in the euro crisis, the coronavirus broke through all of them through no fault of their own and cannot be explained by laziness or a Mediterranean lifestyle or such moral criteria. Questionable whether such moral distinctions remain dominant when somebody has to pay for it.
Such a financial crisis, which can quickly grow into a euro crisis and could be larger in size than the last euro crisis, could also threaten the existence of the euro and then it is also questionable whether Lagarde’s Whatever it takes is sufficient and the ECB has enough reserves and the capacity to intervene, also if there would be a currency war. There is also the question of whether inflation or deflation could result, followed by currency reform or a breakdown of the euro or a downsizing of the euro area or partial return to national currencies. In this case, however, the unbundling process is likely to be very difficult, as can already be seen from Brexit and the negotiations for new trade agreements between the EU and the UK. An abrupt breakup would also have rabid effects.
It will also be interesting to see how the rating agencies from Fitch, Moody, etc. will react. Will they keep their rating criteria as before, then there would no longer be a triple-A, but all countries will drop far on the scale, or the rating agencies will change their rating criteria so that even with immense indebtedness you cannot get an A, but it wouldn´t change the rating hierarchy. In the case of already financially precarious and highly indebted, low-level states, a further degradation would mean the flight of financial capital and capital into the hoped-for safer ports and could lead to failed states, state collapse, genocidal poverty and state bankruptcies, possibly a global financial crisis.