ECB Now Owns 80% of the Eurozone

The balance sheet of the European Central Bank (ECB) has risen to 77% of the Gross Domestic Product (GDP) of Eurozone which includes Germany, France, Italy and Spain.

ECB’s balance sheet has risen to €7,657,629 million, not far off from doubling in 2020 from about €4.7 trillion.

Eurozone’s GDP in contrast has fallen to now about €10 trillion, its lowest level since 2018 and pretty much stagnating since 2007.

The Eruozone area as a whole hardly has seen much growth for the past decade when accounting for the contractions in contrast to both America and China which have seen their GDP grow significantly.

While Miami and wider Florida sees no restrictions at all, Europe continues to struggle economically with various countries at different stages of lockdowns.

Now more than a year on, the economy is not seeing much growth with ECB picking up the tab to monetize assets which eventually it may have to unload.

This €7.7 trillion in ECB’s balance sheet is debt that must be repaid, with the vast majority of the debt being government debt which is sold to commercial banks and then bought off them from the central bank.

Interest rates are near zero however currently, and in some euro states they are even negative, so this arrangement for now probably won’t cause any political problems.

However if interest rates need to be increased due to a rise in the velocity of money, and thus inflation, the funneling of taxpayer money to the private banking sector based on printed fiat from nothing by ECB may raise difficult equitable considerations.

European governments however have not quite gone to the extent of US presidents with Biden proposing a $6 trillion budget after some $6 trillion was spent during the pandemic.

It’s not clear therefore whether Europe will see a bounce in inflation, or even in economic growth, with the elected arguably far too cautious in providing a monetary shock and awe to electrify the economy.

Yet that may soon change as Germany eyes going green, with the Grunde having their ups and downs but if they win, the citizens may at least get something out of this vast new mortgage in a Green New Deal infrastructure spending to upgrade the country and continent for the green and digital revolution.

So the ECB balance sheet may not quite matter in comparison to what is done with all this money, as debt itself is not necessarily bad, but badly invested debt or worse, squandered debt can be bankruptcy which for nation states comes in the form of galloping inflation or in catastrophes of hyperinflation.