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March 29, 2023

Fitch: ECB must prevent ‘cataclysmic’ euro collapse

The European Central Bank (ECB) should ramp up its buying of troubled euro zone debt to support Italy and prevent a “cataclysmic” collapse of the euro, David Riley, the head of sovereign ratings for Fitch, said on Wednesday, CNBC informs. Speaking to investors as part of a European roadshow, Riley said the collapse of the euro would be disastrous for the global economy, and while it is not Fitch’s baseline scenario, it could happen if Italy did not find a way of its debt problems. “The end of the euro would be cataclysmic. The euro is a reserve currency,” Riley said. He also urged the ECB to abandon its current reluctance to scaling up its purchases of troubled euro zone debt such as Italy’s and drop its resistance to the bloc’s bailout fund, the EFSF – European Financial Stability Facility, borrowing directly from it. “Can the euro be saved without more active engagement from the ECB? Quite frankly we think no,” Riley said, adding that the bank had plenty of scope to expand its balance sheet with unleashing a wave of inflation across the euro zone. Fitch has warned that the economic outlook for the euro zone has darkened further in recent months, but it has said it does not expect to strip France of its triple-A rating for this year at least.

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