It seems to have received little attention but, last week, Portugal successfully raised finance by issuing so called Panda bonds in Chinese currency. This is a country in the Euro issuing bonds in a foreign currency and in a Chinese one at that.
According to the Madrid based EU affairs news website ‘South EU Summit’:
Portugal first revealed its plans to issue debt in China’s interbank bond market last September. The government noted that they expected to raise 3 billion Renminbi (RMB)* through the issuance of bonds with maturities of up to five years. While Portugal will be the first Eurozone country to do so, other governments including Poland, Hungary…..have already issued bonds in China’s panda bond market.
This all seems to be part of some governments’ response to the winding up of Quantitative Easing by the European Central Bank (ECB).
It is a damning endictment of the Euro, whose Central Bank does not act as lender of last resort. So really Portugal might as well issue its bonds in Chinese Yuan just as much as anything else including Euros – both are foreign currencies because it has unfortunately given up the Escudo when it joined the Euro. Is the Euro facilitating the advance and expansion of the Chinese belt and road initiative? Quite obviously yes. And that is an indictment of the ECB. Whether it also allows Portugal to technically avoid its 3% government deficit cap, I’m unsure. My feeling is it probably does.
Italy meanwhile, having already joined the belt and road programme, and also, according to the Telegraph, is in a low key fashion, very likely to launch its parallel currency – the so- called ‘mini BOT’. The BOT is Italy’s ordinary ‘Treasury’ bill whereas the mini-BOT would be a government debt in paper form that pays zero interest and never matures. As taxes can be paid with it, it will be currency in all but name.
This would be a further nail in the coffin of the ECB and be a further step on the way back to taking democratic control – much as I’ve always suggested local authorities could do in the UK.
It is a decidedly odd world where a nominally Communist government understands much better how exactly capitalists’ money works than most of the neoliberal capitalist governments do themselves. Their only competition is an Italian government which seems to have one foot in fascism.
Of course the capitalist governments could realise perfectly what they are doing, in which case they are reckless in their carelessness and in due course are likely to be hoist by their own petard.
It is worrying that the supposed Communists, while themselves unconcerned by democracy, seem to realise that keeping the people reasonably prosperous is important to their survival, the actual capitalists are terribly worried about democracy but seemingly not at all by the prosperity of their people.
We seem to be completely lost…
*Renminbi is ‘the people’s currency’ in Mandarin but Yuan is the actual money number – so it seems to me this might be a mis-translation? RMB would be the equivalent of Sterling but when I buy something for a 100 I usually talk about 100 pounds not 100 sterling. So I think this should be 3 billion Yuan. Perhaps it is to save the confusion with the Japanese Yen ¥, which uses the same symbol. (Perhaps we should adopt the Chinese 元?)