Eurobonds due to Corona

So, today 9 European countries, including my country (Greece) as well as Italy, France, Spain, Portugal, Ireland, Slovenia, Belgium, and Luxembourg, in order to face the Coronavirus crisis. There is even a piece of Mario Draghi on the FT about it: https://www.ft.com/content/c6d2de3a-6ec5-11ea-89df...
What do you guys/gals think of the proposed Eurobonds? Should the Germans, Dutch, Poles etc. agree to the issue of Eurobonds?

Comments (17)

Mar 25, 2020

hell no, disaster for the "rich" countries..

Mar 26, 2020

If they believe in the European project then that shouldn't matter. Solidarity with the more vulnerable South in a crisis like this will pay dividends in cementing the pan-European identity. If Germany and France are not willing to make (a relatively minor) financial sacrifice for the sake of the EU, why even continue funding it at all?

Array

    • 1
Mar 27, 2020

The dissolution of the EU from an Italexit will be a bigger disaster for Germany, Austria, and the Netherlands. And judging from what Conte said yesterday with respect to the ESM and the Eurobonds, and the 10-day deadline he gave to the EU, I think the Eurobonds should be issued yesterday.

    • 1
Mar 27, 2020

Poland is not part of the Eurozone, just saying.

Eurobonds are a stupid idea by intellectuals who have made ''more Yurop'' their religion. In this case, the closer the institution is to the needs of the citizen, the better. We don't need supranational intervention. We need it local.

The needs to Lombardy are completely different from the needs of Calabria and those are both completely different from those of the Netherlands.

I am glad it will fail, further discrediting the worthless pro-Eu politicians in the South, which will eventually lead to the break up of a poorly conceived currency that made European nations waste 3 decades. The Euro is not uniting Europe, it's dividing it. Split it, reduce the competence of the EU to only free trade area, restore national sovereignty and we'll go back to cooperating and liking each other again.

Mar 27, 2020

I know that Poland is not in the Eurozone, but I guess that Eurobonds would be available for all EU countries, not just those in the Eurozone. This should be the case, because the coronavirus will cripple most economies in Europe.

Now you will tell me that Germany has amassed massive surpluses and can finance her needs with minimal needs for debt - at least for the time being. Good on them. Most European countries, however, are not in this condition to do so. Greece in fact was just beginning to recover before the coronavirus struck. The coronavirus has smashed the Italian and Spanish economies - in Italy in fact the strongest region has been most heavily struck by the virus - and will cripple my country's economy, too. Now Greece has amassed surpluses and we will be able to survive the lockdown we have, but if there is a second resurgence of the virus, we're smoked. And the longer this pandemic continues to spread, the more damage will be done.

Hence the need for stimuli, i.e. debt. But actual local resources are limited, if not expended. This will mean foreign and supranational capital and it will indeed mean austerity in the future, but a permanent loss of production and 40-50%+ unemployment with limited capital is a disaster that must be avoided. Few nations in Europe can muster the stimuli needed to save their economies and even fewer have amassed surpluses. Right or wrong, this is the reality. The "worthless pro-Eu (sic) politicians in the South" face the same reality as the "valuable anti-Eu politicians in the North" because the coronavirus is not the fault of any EU country.

Moreover, the EU is more of a benefit to Northern European countries than it is to Southern European countries. While Italians wouldn't mind the lira too much, the German industries would dread a Deutsche Mark. Germany's excellent economy is actually its Achilles' heel and would drive the DM to God-like levels, which means more expensive German exports. Therefore, the Germans have a vested interest in the Euro. The EU will not survive an Italexit, because Italy is the third biggest net contributor to the EU. If Italy were to ditch the Euro, again it would not survive.

The point is that the EU is built on solidarity and without it, it becomes politically worthless. If Italy resorts to China for help, or goes to the IMF on her own without EU support, or the Eurobonds are not issued, that "solidarity" will be equal to "shit" to many Europeans. That will be the end of the EU, which I am sure you would celebrate. As a pro-EU Southern European myself, I am positive that there are scores of pro-EU Northern Europeans. Together we will fight for the European dream. The death thereof will be a defeat for us. The incentives to let the EU die exist, but so do the incentives to keep it alive. It is us, or nobody.

Mar 27, 2020
CommadantCipher:

I know that Poland is not in the Eurozone, but I guess that Eurobonds would be available for all EU countries, not just those in the Eurozone. This should be the case, because the coronavirus will cripple most economies in Europe.

Bonds issuance is strictly related to the currency and given that Poland has another currency/central bank, it's not even on the table. They aren't part of the EUCO etc either.

Given also that Eastern Europe is poorer than the West, it'd make Germany/Holland etc even less likely than they already are to accept the idea.

Now you will tell me that Germany has amassed massive surpluses and can finance her needs with minimal needs for debt - at least for the time being. Good on them. Most European countries, however, are not in this condition to do so. Greece in fact was just beginning to recover before the coronavirus struck. The coronavirus has smashed the Italian and Spanish economies - in Italy in fact the strongest region has been most heavily struck by the virus - and will cripple my country's economy, too. Now Greece has amassed surpluses and we will be able to survive the lockdown we have, but if there is a second resurgence of the virus, we're smoked. And the longer this pandemic continues to spread, the more damage will be done.

This is the time you realize that any talk of ''recovery'' for Greece was complete crap. The program for Greece prescribes surpluses until... 2046, at least. This in case of no recessions. It is extremely hard for me not to insult whoever came up with these kind of ideas, because quite frankly, given the shaky foundations of the Greek economy, making a debt reduction program over the course of 30 to 50 years expecting no recession is sheer intellectual dishonesty. Greece should do what it should have done years ago, default, leave the Euro. Same for the rest of S. Europe. Germany does exactly the same, they do what's best for them. You have an asymmetry: S. European politicians are absolutely enamored with the idea of the United States of Europe, thinking it'd fix their countries problems, so they are ready to supersede national interest every time. Northern politicians despite their claims of being pro-EU staunchly defend their national interests (and rightfully so). As a result, the North always wins, just like it happened yesterday, 6 years ago, 8 years ago, etc.

Hence the need for stimuli, i.e. debt. But actual local resources are limited, if not expended. This will mean foreign and supranational capital and it will indeed mean austerity in the future, but a permanent loss of production and 40-50%+ unemployment with limited capital is a disaster that must be avoided. Few nations in Europe can muster the stimuli needed to save their economies and even fewer have amassed surpluses. Right or wrong, this is the reality. The "worthless pro-Eu (sic) politicians in the South" face the same reality as the "valuable anti-Eu politicians in the North" because the coronavirus is not the fault of any EU country.

Moreover, the EU is more of a benefit to Northern European countries than it is to Southern European countries. While Italians wouldn't mind the lira too much, the German industries would dread a Deutsche Mark. Germany's excellent economy is actually its Achilles' heel and would drive the DM to God-like levels, which means more expensive German exports. Therefore, the Germans have a vested interest in the Euro. The EU will not survive an Italexit, because Italy is the third biggest net contributor to the EU. If Italy were to ditch the Euro, again it would not survive.

And that's a good thing. I finished university in Italy during the Monti era, the pro-EU government that claims to have saved the country. They might, but their policies also caused a 40% youth unemployment rate and I was among those for quite some time. Those who graduate today in Italy will face the same, because the Italian government, notably Gualtieri and Conte, will never tell Germany/Holland/the Eu what needs to be said.

The point is that the EU is built on solidarity and without it, it becomes politically worthless. If Italy resorts to China for help, or goes to the IMF on her own without EU support, or the Eurobonds are not issued, that "solidarity" will be equal to "shit" to many Europeans. That will be the end of the EU, which I am sure you would celebrate. As a pro-EU Southern European myself, I am positive that there are scores of pro-EU Northern Europeans. Together we will fight for the European dream. The death thereof will be a defeat for us. The incentives to let the EU die exist, but so do the incentives to keep it alive. It is us, or nobody.

Where do you see the solidarity outside university textbooks and media propaganda?
Greece 2014-5? None. Immigration issues? LOL. Coronavirus? Oh not even this one of course.

How many times do you have to be disappointed to accept the cold harsh truth?

    • 1
Mar 28, 2020

VonDerLeyen just said Germany reservations on bonds are fully justified.
Yay!

Mar 29, 2020

What interests me is what your PM's options really are. Italy's exiting from the Eurozone might be easier than leaving the EU wholesale, but I wonder whether the Italian PM can afford the political costs of such an option. More importantly, where else can Italy draw capital from? The IMF, sure, but can Italy really go to the Chinese and demand financial aid?

Mar 29, 2020

As things are going now:
Option 1: ESM funding WITH conditions, despite Conte-Gualtieri insisting it should be unconditional due to the emergency. My latest info say Conte and M5S won't support the conditional access, but Gualtieri and PD will. The condition will be a wealth tax, almost certainy. I personally want to see this happening because wealth tax are extremely unpopular in Italy, yet the most pro-EU crowd are the wealthiest. So it's either the pro-EU crowd in Italy pays for Italy to remain in the Eurozone or face revolution.
Option 2: capital segregation. Italy gets de-facto booted by the ECB from the free movement of capital regime like it happened to Greece years ago, to squeeze the government and force it to surrender to option 1.
Option 3: Draghi either President of the Republic or Prime Minister. He still won't have more room than Conte-Gualtieri.
Option 4: sale of state assets or long term concessions of historical palaces. PD has already hinted that. Again, it would be national humiliation as the cost of belonging to the EU now becomes losing the national heritage.
Option 5: Mattarella-Conte-Gualtieri are removed. Unfortunately Salvini, who's the main alternative, has so far shown lack of leadership skills in this crisis. If there's a time for radical solutions it's now.

Apr 1, 2020

Von der Leyen went on record today and proposed the Kurzarbeit model to help curb rising unemployment in Europe. I wonder if it's applicable in Southern Europe based on our realities.

Apr 1, 2020

Unlikely given the numbers Italy and Spain will face.

What's likely at this moment:

Some sort of minimal fund, think 20 bn as ''solidarity'' contribute with very strict conditions. Possibly the ESM under other names. Oppositions will pick that up with ''under the guise of helping us, governments brought the Troika at home and sold us out''.

This while business shut down, suicides start, revolts as well. Summer will be boiling.

Apr 2, 2020
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