In my latest blog for @Bruegel_org, I argue why we need EU debt to insure against the pandemic. I show that EU debt will always be an (indirect) liability to national budgets. Spending control is the central element for success. Thread bruegel.org/2020/04/eu-deb…
EU debt as insurance against catastrophic shocks is in Germany's and everybody's interest as it increases the stability of monetary union and helps avoid fragmentation of single market.
Directly or indirectly, EU debt requires tax revenues. Since the tax base does not change by adding EU level, ultimately it is a cost to national budgets (I explain this in some detail in post).
Borrow jointly and just transfer money to every country without any oversight is inacceptable even in federations. But oversight in EU should not be intergovernmental as it pits national interests against each other. Moral hazard needs to be tackled upfront by EU institutions.
ECB will find it legally and politically easier to back EU debt than national (even though it can still do more with national debt). No reason to worry about inflation or fiscal dominance, on the contrary.
Many #EUCO meetings will be needed to come to solution. Legal, political and accountability questions are complicated. Art 122(2) gives some options but may not be enough.
EU leaders cannot leave the job only to ECB. Time to step up or risk lasting damage. @Shahinvallee @lucasguttenberg @Mij_Europe @EuroBriefing
