Banks endorse growing calls for jointly issued sovereign coronabonds
Essential state support programmes for bank credit to SMEs raise questions about sovereign debt sustainability that need quick and credible answers.
On Wednesday, news circulated of a letter to European Council president Charles Michel signed by the prime ministers or presidents of nine European countries. These include France’s Emmanuel Macron, Italy’s Giuseppe Conte, Spain’s Pedro Sánchez and the prime ministers of Belgium, Greece, Ireland, Luxembourg, Portugal and Slovenia.
The letter calls for the activation of all existing common fiscal instruments to support national efforts to sustain economies in the face of the coronavirus.
“In particular, we need to work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all Member States, thus ensuring stable long term financing for the policies required to counter the damages caused by this pandemic.”
The financial world is moving like a film on fast-forward. We have seen movies a bit like it before. But this one is different.
After the collapse of Lehman Brothers in 2008, the cost of bailing out banks, the loss of tax revenue and soaring social costs of large-scale unemployment eventually led to a euro-area sovereign debt crisis in 2011 and to former European Central Bank president Mario Draghi’s famous “whatever it takes” proclamation.