ECB warns of ‘doom loop’ between banks and governments that led to Ireland’s bailout a decade ago

ECB warns of 'doom loop' between banks and governments that led to Ireland's bailout a decade ago

The “doom loop” between the banks and the governments that dragged Ireland out of the EU / IMF rescue operation is being repeated this time. The European Central Bank (ECB) has warned that Kovid’s actions could link debt-ridden countries to risky businesses through loans and credit guarantees.

Its latest Financial Stability Review says businesses, including Ireland’s debt-funded stimulus package and $ 2 billion loan guarantee scheme, are helping businesses and employees cope with the epidemic, but prolonging action or dragging out too soon could lead to a crisis.

“The sharp rise in corporate and sovereign debt means the growing risk of financial stability from the emerging sovereign-corporate banking nexus in the medium term.

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