Eurozone is on the way to fiscal union | The A-List | Must-read views on today’s top news stories – FT.com – FT.com

Eurozone is on the way to fiscal union | The A-List | Must-read views on today’s top news stories – FT.com – FT.com

... the scheme for issuing eurozone bonds would ensure that in order to be attractive to overseas investors they are at least as safe as and more liquid than existing high-quality government bonds. It should also involve incentives to fiscal discipline so that participating governments contribute to keeping the new bonds on a sound footing. In view of these criteria, the incentives-focused ‘blue bond’ proposal by Jacques Delpla and Jakob von Weizsäcker remains the best on offer...

The German experts’ proposal addresses these concerns by proposing a temporary guarantee scheme covering current debt in excess of 60 per cent of gross domestic product. They envisage the creation of a temporary redemption fund that would benefit from joint and several liability and through which participating countries could issue debt in the next few years until they have reached their quota (namely, their current debt less 60 per cent). This debt would be paid off and gradually extinguished over time. To this end, each participating country would be required to earmark specific tax revenues...

First, the temporary possibility to issue new debt under joint and several liability would give breathing space to countries in trouble, leaving them time to adjust. Second, it would be an instrument to rebuild trust. For these two reasons, it deserves serious consideration.