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Mario Draghi Is Playing With Fire

Remember asset-backed securities and the 2008 global financial crash? Desperate to jumpstart Europe's economy, the European Central Bank chief is making them presentable again.

Super Mario accelerates
Super Mario accelerates
Ulrich Schäfer


MUNICHAn anti-lock braking system (ABS) is named such because it is supposed to prevent the wheels of a car from locking up when braking, thus avoiding skidding. The ABS is meant to avoid the worst: crashes, destroyed cars, and of course, injury and death.

But the three letters ABS also stand for another — very dubious — practice not invented by wise automotive engineers but instead by smart-aleck investment bankers. Asset-backed securities were among the credit packages for banks and funds created seven or eight years ago that made their way around the globe. They ended up contributing to the crash of the financial markets: Nobody actually knew who owed whom — and how much — and what risks they had incurred.

And now the European Central Bank (ECB), of all institutions, wants to make these dubious securities presentable again. ECB President Mario Draghi has announced that the central bank will be buying up these and other securities to the tune of up to half a billion euros — that's 500,000,000,000 euros.

What the ECB hopes to achieve by this is to create the necessary space for banks to extend new credit. This is mainly meant to help European crisis states so that their banks can extend more credit to small- and medium-sized businesses.

It's not that it's unusual for a central bank to hold securities. When commercial banks want to borrow from the ECB, they often use top-rated securities as collateral. But it is something else entirely for the central bank to accept securities of questionable quality, especially because it puts the financial institution into a market that a serious central bank has no business being anywhere near, and one that has already led to full-blown global crisis.

Mario Draghi has been saying for months that the ECB would carefully monitor which asset-backed securities it buys. And it is true that not every credit package on the financial markets is a gamble. And yet the ECB is playing with fire.

The move also demonstrates just how badly off the central bank is right now, as nothing it has done so far to combat the crisis has actually helped. It can't even lower base interest rates anymore. The reduction from 0.15% to 0.05% is merely symbolic.

Yes, necessity is the mother of invention, but no, not all inventions make sense. And some of them, like Mario Draghi's ABS emergency brake, are downright dangerous.

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Forced Labor, Forced Exile: The Cuban Professionals Sent Abroad To Work, Never To Return

Noel, a Cuban engineer who had to emigrate to the faraway island of Saint Lucia, tells about the Cuban government's systematic intimidation techniques and coercion of its professionals abroad. He now knows he can never go back to his native island — lest he should never be allowed to leave Cuba again.

Forced Labor, Forced Exile: The Cuban Professionals Sent Abroad To Work, Never To Return

Next stop, Saint Lucia

Laura Rique Valero

Daniela* was just one year old when she last played with her father. In a video her mother recorded, the two can be seen lying on the floor, making each other laugh.

Three years have passed since then. Daniela's sister, Dunia*, was born — but she has never met her father in person, only connecting through video calls. Indeed, between 2019 and 2023, the family changed more than the two little girls could understand.

"Dad, are you here yet? I'm crazy excited to talk to you."

"Dad, I want you to call today and I'm going to send you a kiss."

"Dad, I want you to come for a long time. I want you to call me; call me, dad."

Three voice messages which Daniela has left her father, one after the other, on WhatsApp this Saturday. His image appears on the phone screen, and the two both light up.

The girls can’t explain what their father looks like in real life: how tall or short or thin he is, how he smells or how his voice sounds — the real one, not what comes out of the speaker. Their version of their dad is limited to a rectangular, digital image. There is nothing else, only distance, and problems that their mother may never share with them.

In 2020, Noel*, the girls' father, was offered a two-to-three-year employment contract on a volcanic island in the Caribbean, some 2,000 kilometers from Cuba. The family needed the money. What came next was never in the plans.

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