ECB's Schnabel warns against blocking the EU's recovery fund

© Reuters. FILE PHOTO: Specialists work on a crane in front of the European Central Bank (ECB) in Frankfurt

BERLIN (Reuters) – European Central Bank board member Isabel Schnabel has warned against attempts to block the European Union’s Recovery Fund, saying such a step would be an “economic disaster for Europe”.

The fact that the fund and national aid programs will lead to significantly growing national debt levels was not a problem provided the spending boosted sustainable economic growth, Schnabel told German magazine Der Spiegel.

“The increase in public debt is inevitable and sensible in the face of this crisis of the century, as long as the expenditures sustainably boost growth,” she said in an interview published on Friday.

Germany’s constitutional court put the ratification of the EU recovery fund on hold last month, saying it was looking into an emergency appeal against the debt-financed investment plan.

Schnabel also raised concerns regarding potential threats for the financial markets caused by the activities of hedge funds.

The fact that the collapse of U.S. hedge fund Archegos Capital Management led to billions of losses at major lenders such as Credit Suisse (SIX:) was “a warning signal that there are significant systemic risks,” Schnabel said.

The case showed that there were also “significant regulatory gaps,” she said.

Switzerland’s No. 2 bank took a 4.4 billion Swiss franc ($4.76 billion) hit from dealings with Archegos , prompting it to overhaul the leadership of its investment bank and risk divisions.

Archegos collapsed last month when its debt-laden bets on stocks of certain media companies unravelled. Credit Suisse and other banks, which acted as Archegos’ brokers, had to scramble to sell the shares they held as collateral and unwind the trades.

READ  Exclusive: T-Mobile prepares for Boost auction if Dish Network talks stall - sources

($1 = 0.9250 Swiss francs)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Please enter your comment!
Please enter your name here