Von der Leyen: forced mobilisation of private savings?
10 or 30-year bonds, deposit freezes and the debt crisis: Von der Leyen's plan for your savings. We examine the fine print.
English · Original discussion in Spanish · Published
Von der Leyen: the plan to mobilise your savings and buy bonds
Is the European Commission preparing a mechanism to channel EU citizens' savings into long-term sovereign bonds, possibly even on a compulsory basis? The idea, which is circulating in economic circles, comes at a time of soaring debt, rising military spending and relentless inflation.
The context: from war to the need for funding
The reasoning starts with the Union's turn to rearmament. After years of tension with Russia, the European economy has been retooled for the war effort. That leaves public coffers stretched to the limit. And that is where 'idle' money comes in: private deposits that are neither invested nor spent. The temptation to use them to prop up public debt is obvious.
The mechanism: 10 and 30-year bonds to tame the curve
The option being considered is the issuance of very long-term debt – 10 and 30 years – which citizens would have to buy, or nearly so. The goal would be less about raising money than compressing the long end of the yield curve, a segment the European Central Bank no longer controls with its usual instruments. It sounds technical and clean. The reality is reaching into the taxpayer's pocket.
The scepticism: deposit freezes, inflation and distrust
The response is predictable. Some point out that in theory the money is yours, but bank account freezes show that as soon as the numbers stop adding up, 'yours' is a relative term. Others joke that the savings will go towards buying iodine tablets, while the harshest critics argue we are simply ATMs with legs. Inflation, for its part, has become the best excuse to justify interference.
Among the technical voices, some spell out the mechanism: forcing the purchase of 10 or 30-year bonds would lower the state's borrowing costs, but it means direct intervention in each citizen's savings decisions. Where the proposal currently stands, and whether it will ever materialise, only time will tell.
Von der Leyen wants your savings. The question is whether she will still want to give them back when all this is over.
Is the European Commission preparing a mechanism to channel EU citizens' savings into long-term sovereign bonds, possibly even on a compulsory basis? The idea, which is circulating in economic circles, comes at a time of soaring debt, rising military spending and relentless inflation.
The context: from war to the need for funding
The reasoning starts with the Union's turn to rearmament. After years of tension with Russia, the European economy has been retooled for the war effort. That leaves public coffers stretched to the limit. And that is where 'idle' money comes in: private deposits that are neither invested nor spent. The temptation to use them to prop up public debt is obvious.
The mechanism: 10 and 30-year bonds to tame the curve
The option being considered is the issuance of very long-term debt – 10 and 30 years – which citizens would have to buy, or nearly so. The goal would be less about raising money than compressing the long end of the yield curve, a segment the European Central Bank no longer controls with its usual instruments. It sounds technical and clean. The reality is reaching into the taxpayer's pocket.
The scepticism: deposit freezes, inflation and distrust
The response is predictable. Some point out that in theory the money is yours, but bank account freezes show that as soon as the numbers stop adding up, 'yours' is a relative term. Others joke that the savings will go towards buying iodine tablets, while the harshest critics argue we are simply ATMs with legs. Inflation, for its part, has become the best excuse to justify interference.
Among the technical voices, some spell out the mechanism: forcing the purchase of 10 or 30-year bonds would lower the state's borrowing costs, but it means direct intervention in each citizen's savings decisions. Where the proposal currently stands, and whether it will ever materialise, only time will tell.
Von der Leyen wants your savings. The question is whether she will still want to give them back when all this is over.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (13 replies).
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