This report from the Wall Street Journal says that The German Council of Economic Experts is discussing some form of Eurobond:
“The German Council of Economic Experts, also known as the Five Wise Men, last week proposed creating a “European Redemption Fund” that would take over the excess sovereign debt of all countries that break the EU’s limit of 60% of gross domestic product. In return, beneficiary countries would have to submit to strict economic oversight and institute constitutional debt brakes aimed at rapidly shrinking their debt burdens.
The European Commission, the EU’s executive arm, will propose publicly next week a package with options that move the 17-member bloc toward closer economic integration, he said.
“We aim at coining a balanced package between substantial reinforcement of economic governance, on the one hand, and presenting options for stability bonds, on the other,” said Mr. Rehn.
“Such bonds could, if well designed, strengthen financial stability and fiscal discipline in the euro area, and thus facilitate sustainable growth and job creation in Europe as a whole,” he said in the interview.
Common euro-zone bonds, or “stability bonds,” have garnered strong support from members of the European Parliament, weaker euro-zone member states and notable economists, as a way to pool regional risks and support troubled economies.”
Details on this fund are still cloudy, but the report says the bonds would exist for 25 years and could finance up to $2.3T in debt over the 60% level. I believe this is essentially the European Redemption Pact proposal which has been floating around recently. You can read about that proposal here. This is basically Eurobonds with strings attached. I can’t really comment on it until more details are released, but it sounds like we might be moving in the right direction. And that’s a good thing because this situation is quickly spiraling out of control…..
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.