Trichet Says Cancelling European Debt a ‘Recipe for Catastrophe’

The video discusses the controversial idea of the ECB holding or canceling government debt, which is deemed illegal but theoretically possible if treaties are changed. The speaker argues against this, citing risks to credibility and investor confidence. Instead, the focus should be on managing debt sustainably post-pandemic, avoiding premature austerity, and ensuring debt diminishes as a proportion of GDP to maintain trust and avoid economic catastrophes.

What is the main concern about the ECB holding or canceling government debt?

• It would increase inflation.

• It would strengthen the economy.

• It is illegal and could damage credibility.

• It would lead to higher taxes.

Why is the idea of perpetual trust in advanced economies' treasuries considered naive?

• Because it underestimates the importance of credibility.

• Because it overestimates the role of technology.

• Because it ignores potential political changes.

• Because it assumes unlimited resources.

What is a potential risk of discussing austerity too soon?

• It might strengthen the currency.

• It might undermine economic recovery.

• It could cause hyperinflation.

• It could lead to increased borrowing.

What is the suggested approach to managing debt after the pandemic?

• Increase taxes significantly.

• Implement immediate austerity measures.

• Gradually reduce debt as a proportion of GDP.

• Cancel all outstanding debts.

What is the ultimate goal of managing debt sustainably?

• To ensure debt diminishes as a proportion of GDP.

• To eliminate all debt immediately.

• To rely on foreign investments.

• To increase the debt ceiling.