Harr's view: Fiscal dominance, MMT and the next euro crisis
Thomas Harr, PhD, Global Head of FI&C Research, +45 45 13 67 31, firstname.lastname@example.org
Government debt will skyrocket everywhere due to the COVID-19 crisis, particularly in many Eurozone countries.
The skyrocketing government debt and the lack of risk sharing among member states require monetary financing. Luckily, the ECB is delivering just that.
In my view, we have shifted to fiscal dominance in the Eurozone from monetary dominance. I believe that the COVID-19 crisis is a real world experiment of MMT in the Eurozone and elsewhere.
In my view, we are not heading for a new euro crisis now due to the ECB's early commitment in this crisis to monetary financing. However, the end of monetary financing in the Eurozone could kick-start the next euro crisis.