BNE calls on eurozone creditor states to accept eurobonds as part of the solution to the euro crisis.
The Commission today is throwing its weight behind the idea of eurobonds as part of the solution to the sovereign debt crisis in Europe. Germany opposes such measures on the grounds that they would introduce unacceptable moral hazard and remove the market pressure needed for peripheral states to reform. The choice, however, may be between a combination of eurobonds and ECB quantitative easing or a breakup of the eurozone.
Phillip Souta, Director of BNE, said “It may be that the only way Germany and other creditor eurozone members can protect the euro is through radical measures such as eurobonds.”
According to estimates by the German Institute for Economic Research (DIW), this would cost Germany about €15 billion each year. Phillip Souta said, “This cost would be more than worth it to save the euro, the breakup of which would be a disaster for Europe.” He went on to say that, “German growth over the last ten years would not have been possible with the Deutschmark, which would have had much greater value than the euro, and choked off Germany’s export led recovery.”
Opponents of eurobonds argue that they would introduce an element of moral hazard, but euro bonds can be easily designed to mitigate those risks. One proposal – a variation of which will be included in today’s Green Paper from the European Commission – comes from Jacques Delpla of the Conseil d’Analyse Économique in Paris and Jakob von Weizsäcker, a fellow at Bruegel, a research organisation in Brussels. With this proposal, eurobonds would only apply to the first 60% of a member’s debt in a “blue bond” and with individual members being responsible for anything above it in a “red bond”.
Notes to Editors
Business for New Europe is a coalition of pro European British business leaders who articulate a positive case for reform in Europe. We comment on European issues that have an impact on the UK. For a list of our members, please follow this link http://www.bnegroup.org/about/people/
For media enquiries, please contact Paul O’Hagan on email@example.com or contact +44 (0)7944 572 351. Phillip Souta can be contacted directly on +44 (0)78 8788 6437.