May 15, 2019
Sir, Mehreen Khan reports that the European Commission’s Spring forecast warned last week that: “The geographical make-up of the euro area’s fiscal stance does not reflect the adjustment needs in the high-debt member states” “The eurozone’s fight for stimulus” May 15.
If so, for how long will the European Commission back those 0% risk weights that for the purpose of bank capital requirements have been assigned to all eurozone sovereigns, even when these de facto are indebted in a currency that is not their own domestic printable one?
That risk weight translates into signaling lower interest rates for the eurozone sovereigns that what would have been the case without these distortions.
That has caused many of the eurozone sovereigns to be painted into a corner. How does the European Commission propose they get out of it?
@PerKurowski