A quick way to have European common debt financing expenditures to deal with the crisis would be to use the EU Commission to issue bonds to finance exceptional programmes within the EU budget rules under the emergency clause of TFEU article 122.2 1/8
Contrary to the announced supportive SURE programme, the concept would not be to provide loans to countries (increasing their debt), but rather to share the burden and take over budget expenditures of member countries, e.g. with health or unemployment subsidies.2/8
The repayment of the debt charges would be made via additional contributions to the European budget that would not add upfront to national debts but would impact it only via their effect on future deficits when the annual payments would be actually made.3/8
Additionally, the same path could be used for creating later a true Investment Plan for Europe, this time with significant public money involved to crowd-in private investment. This stimulus is necessary because the recovery after the health emergency ends will be sluggish 4/8
Reasons for a slow recovery: a)Households risk aversion and increase in savings as it happened after major crises;b)Destruction of productive capacity caused by bankruptcies and lack of investment;c) Deceleration of world trade, with damaged supply chains shrinking further 5/8
Not using the Commission and EU budget for quick, effective help to all countries, issuing coronabonds would entail creating a new legal framework and asking some institution (e.g. the ESM), to provide the service of organising the issuance and prepare trading 6/8
ESM programmes don´t seem attractive as they would be used only by weaker countries, carrying a stigma and a bad sign to markets. At the same time, the ECB purchases have reduced debt yields. Naturally, not to zero, and the purchases are not unlimited. 7/8
The ESM can be useful later on if the crisis lasts longer. Therefore as a European institution should not be demonised the way it´s happening in a few countries. Its conditionality should be adjusted to the present crisis and be very different from some cases in the past. 8/8
