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Exchange between MEP Marco Zanni and ECB’s Christine Lagarde Exposes Eurosystem Corruption

April 23, 2020 (EIRNS)—Because the ECB, in order to include junk bonds, has lowered the rating of eligible assets for its Assets Purchase Program (APP), the corrupted euro system allows the European Central Bank to purchase junk bonds and derivatives directly from corporations, but it forbids the ECB to buy government bonds, except from banks, so that the latter always gain.

In a written query to the ECB, European Parliament Identity and Democracy Group Chairman Marco Zanni (Italy-Lega) demanded an explanation of why the ECB is clearing corporations from moral hazard while keeping it for states.

“Can the ECB explain why it is permissible to make direct purchases on the corporate instrument market when government instruments can only be purchased on the secondary market,” Zanni asked ECB President Christine Lagarde. “Does [the ECB] not view it as distortionary that the notion of moral hazard is being interpreted differently depending on whether the beneficiary is a public sector or a private sector organization?”

ECB President Lagarde answered on April 21 by referring to Article 123 of the European Treaty (TFEU), saying:

“The objective of Article 123 of the TFEU is to encourage the Member States to follow a sound budgetary policy, not allowing monetary financing of public deficits to lead to excessively high levels of debt or excessive Member State deficits. The Treaties have been understood to mean that primary market purchase of government debt, i.e., the direct financing of governments, would undermine the capability of this objective to encourage such disciplined budgetary policy. This is why, under the Public Sector Purchase Program (PSPP), which is part of the APP, Eurosystem central banks may only purchase debt instruments issued by the public sector indirectly, namely on the secondary market.”

Her ECB letter is no explanation, but black and white evidence of a corrupt system. Marco Zanni’s comment on Twitter was,

“The ECB answer makes it clear how dangerous are the absurd Eurozone rules: The Treaties forbid purchases of government debt on the primary market because otherwise the markets cannot impose fiscal discipline on sloppy politicians, whereas such a limit does not exist for private debt assets, owned by big corporations. Moral hazard works for politicians but not for managers, great scourges of statalism until they run to Mama State when things go bad.”

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