The severe crises within the Eurozone, which began in 2009, had (and still have) at least two main aspects. One is the problem of sovereign bonds issued by peripheral Euro-States. The other is the fall in the rate of growth of the Eurozone. Among the many proposals and political choices made to overcome these crises, one concerned the so called «Eurobonds» (EB) which in actual fact covers a wide range of bonds. In this present essay I will consider five types of Eurobonds: the Unionbond (proposed by Jacques Delors in 1993), the Goldeurobond (proposed by myself between 2004-2008), the Stabilitybond (proposed mainly by the European Parliament in 2011-12), the Rescuebond (issued by EFSF and ESM since 2011), the EuroUnionBond (proposed by Romano Prodi and myself in 2011-2012). The conclusion of my analysis is that the opposition to EB or EUB is mainly of political nature, being the economic and historical criticism to them rather weak. More precisely the advantages of EB and EUB are the following. First of all, a wide EUB market can compete with that of T-bonds and attract the financial resources which are there in global markets. Some figures must be kept in mind: the estimated dimension of sovereign wealth funds ($6.2 trillion at the end of 2013); the USA public debt ($16.7 trillion at the end of 2013) and the amount of it held by foreign investors ($5.8 trillion at the end of 2013). Secondly, EUB will promote the unification of the EMU in two ways: first due to the convergence of the debt to GDP ratio of EMU-MSs to the normal average ratio, by thus balancing the fiscal strictness of some countries with expansionary policies in others and secondly by enhancing the European infrastructure network and other investments in infrastructure like techno-science. Thirdly, two powerful instruments of economic policy are much better than one. In fact, now the only real but mainly short term effective power within the EMU is the ECB which might be pushed to rather unorthodox policies which are necessary without EUBs but certainly not in line with Bundesbank principles. This expanding of the role of the ECB instead of the use of EUBs will be in the end much more ineffective and in some cases harmful to EMU integration in regard to both the real economy and the fiscal economy as expressed by the convergence of the public debt over GDP ratio. Finally, in my opinion EUB are not issued only for political reasons which one day or the other will lose their ground.The present essay has been written with the data available at the beginning of 2014 as the book in which it appears was planned for 2014.In spite of the changes in the data ,the substance remain unchanged and ,even more,it proves that the decision not to innovate with EUB the policies of EMU and EU has been and is a wrong one.The Juncker’s plan and the Draghi’s quantitative easing will not push in our opinion a new and sound long term growth of Europe.
Quadrio Curzio, A., Eurobonds for EMU stability and structural growth, in Cardinale, I., Coffman D, C. D., Scazzieri R, S. R. (ed.), The Political Economy of the Eurozone, Cambridge University Press, Cambridge University Press, Cambridge (UK) 2017: 395- 434. 10.1017/9781316403730.016 [http://hdl.handle.net/10807/117497]
Eurobonds for EMU stability and structural growth
Quadrio Curzio, Alberto
2017
Abstract
The severe crises within the Eurozone, which began in 2009, had (and still have) at least two main aspects. One is the problem of sovereign bonds issued by peripheral Euro-States. The other is the fall in the rate of growth of the Eurozone. Among the many proposals and political choices made to overcome these crises, one concerned the so called «Eurobonds» (EB) which in actual fact covers a wide range of bonds. In this present essay I will consider five types of Eurobonds: the Unionbond (proposed by Jacques Delors in 1993), the Goldeurobond (proposed by myself between 2004-2008), the Stabilitybond (proposed mainly by the European Parliament in 2011-12), the Rescuebond (issued by EFSF and ESM since 2011), the EuroUnionBond (proposed by Romano Prodi and myself in 2011-2012). The conclusion of my analysis is that the opposition to EB or EUB is mainly of political nature, being the economic and historical criticism to them rather weak. More precisely the advantages of EB and EUB are the following. First of all, a wide EUB market can compete with that of T-bonds and attract the financial resources which are there in global markets. Some figures must be kept in mind: the estimated dimension of sovereign wealth funds ($6.2 trillion at the end of 2013); the USA public debt ($16.7 trillion at the end of 2013) and the amount of it held by foreign investors ($5.8 trillion at the end of 2013). Secondly, EUB will promote the unification of the EMU in two ways: first due to the convergence of the debt to GDP ratio of EMU-MSs to the normal average ratio, by thus balancing the fiscal strictness of some countries with expansionary policies in others and secondly by enhancing the European infrastructure network and other investments in infrastructure like techno-science. Thirdly, two powerful instruments of economic policy are much better than one. In fact, now the only real but mainly short term effective power within the EMU is the ECB which might be pushed to rather unorthodox policies which are necessary without EUBs but certainly not in line with Bundesbank principles. This expanding of the role of the ECB instead of the use of EUBs will be in the end much more ineffective and in some cases harmful to EMU integration in regard to both the real economy and the fiscal economy as expressed by the convergence of the public debt over GDP ratio. Finally, in my opinion EUB are not issued only for political reasons which one day or the other will lose their ground.The present essay has been written with the data available at the beginning of 2014 as the book in which it appears was planned for 2014.In spite of the changes in the data ,the substance remain unchanged and ,even more,it proves that the decision not to innovate with EUB the policies of EMU and EU has been and is a wrong one.The Juncker’s plan and the Draghi’s quantitative easing will not push in our opinion a new and sound long term growth of Europe.
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