The euro zone’s monetary policy resolves the problem of public debt, but not corporate debt

The ECB ’s purchases of the government bonds issued in response to the COVID crisis will probably be irreversible . We know that this amounts to a cancell ation of this public debt, so the new debt will not influence the behaviour of euro-zone governments. But al though the ECB is buying corporate bonds and funding banks on very favourable terms, th e corresponding corporate debt is not cancelled: companies still have to pay interest on their debt and still face the threat of not being able to roll it over at maturity. So there is an asymmetry in how monetary policy treats public debt and corporate debt. For this asymmetry to disappear, the interest rate on corporate bonds would have to be reduced to 0% and their rollover at maturity guaranteed, which is impossible. Growth in the euro zone will therefore not be curbed by public debt but will be by corporate debt.