Dutch criticized by fmr. Central Bank chief for not supporting coronabonds

Netherlands and the European Union
The flags of the Netherlands and the European Unionnastya-malDepositPhotosDeposit Photos

Former Dutch Central Bank head Nout Wellink has voiced his dissent against the government for its reluctance to embrace "coronabonds," a common debt instrument designed to support embattled Eurozone economies in the wake of the coronavirus health crisis. In an interview on Monday with NPO Radio 1, Wellink expressed his support for the joint debt program in the European Union.

Calling the debt “a shared responsibility,” Wellink asserts that the Netherlands will “no longer be a rich country in the North if the South falls.”

The so-called ‘coronabonds’ are a proposed type of mutualized debt, intended to be collectively held by all EU members. Such a measure would be to the advantage of debtor nations such as Italy and Spain, whose states are increasing their spending in an attempt to support their pandemic-stricken economies.

“It is time for unusual steps,” Wellink continues. “A new crisis will begin as soon as this crisis is over: weak countries such as Italy, Spain, Portugal and Greece cannot pay their debts, and the next crisis will begin.”

Some EU countries such as Germany, Austria and Finland stand in opposition to coronabonds because they risk leading to permanent mutualized debt across the EU. Other countries, such as Italy, Greece and Ireland support the bonds on the grounds of sharing the fiscal burden caused by the pandemic. So far, the Netherlands belongs to the former group, with both Prime Minister Mark Rutte and Finance Minister Wopke Hoekstra having stated that a common EU debt instrument would not be necessary.

The debate comes nearly two weeks after the European Central Bank began a monumental bond-buying program, allowing the purchase of private and public sector securities up to a value of 750 billion euros as part of the Pandemic Emergency Purchase Programme. The measures, announced March 18, are a considerable change from prior to the pandemic, when the ECB was barred from buying more than one third of a country’s eligible debt.