Two economics experts have predicted that the Chinese coronavirus could lead to the end of the euro currency — and the potential end of the European Union itself.
Belgian economist Professor Paul De Grauwe said that if the European Union does not show solidarity with member-states like Italy that have been hit hardest by the coronavirus, “the whole European project will disappear.”
He went on to advocate for the creation of “coronabonds,” a financial tool previously known as eurobonds, to help share the economic risk to countries affected by the virus.
Coronabonds have been advocated by several countries, including Italy, as well as European Central Bank (ECB) president Christine Lagarde — but have been largely opposed by richer countries like Germany and the Netherlands.
According to Professor De Grauwe, countries like the Netherlands “live on another planet”, adding: “If I were Italian and if I saw that other countries are not willing to help Italy, I would question membership in the Union.”
Desmond Lachman, an analyst at the American Enterprise Institute, has also stated that the ECB would have very few options other than to help Italy, saying: “After all, being a founding member of the euro and the third member of the eurozone, the euro could not survive without Italy.”
“In other words, the real question is whether Christine Lagarde will be able to convince her reluctant German and northern European masters to allow the ECB to lend sufficient funds in Italy to keep the country afloat,” he added.
Earlier this week, President of the Confundustria industrial lobby Vincenzo Boccia stated that Italy was now in a “war economy”, and UniCredit bank’s chief economist, Erik Nielson, said he expected the country’s economy could shrink by up to 15 per cent this year.
Senator Matteo Salvini, the leader of the League party, also highlighted the economic issue, stating that the country could face severe unrest if an aid package of at least 100 billion euros was not implemented soon.