THE EUROPEAN COMMISSION is considering a range of measures which would bolster confidence in a euro stability bonds project which include the power to put participating member states in severe financial distress into some form of ‘administration’.
In a green paper on the feasibility of introducing Stability Bonds seen by TheJournal.ie and due to be published tomorrow, the Commission outlines proposals to increase surveillance of member states’ economies and fiscal policies in addition to budgetary review plans already underway.
It says certain fiscal conditions could be demanded before any member states is offered entry to the bond scheme and that “increased surveillance and intrusiveness in the design and implementation of national fiscal policies would be warranted beyond the recent proposals”.
The paper also says that if the stability bonds are introduced, a system must be introduced to credibly ensure the full debt service of each participating member station which could include powers to put members who are in severe financial distress into a kind of administration:
One option to this end would be to grant extensive intrusive power at EU level in cases of severe financial distress, including the possibility to put the failing MS [member state] under some form of ‘administration’.
An alternative option is also outlined in the proposals, which suggests ensuring that member states prioritise repayments of Stability Bond debt “over any other spending in the national budgets”.
The Department of Finance declined to comment on the green paper today, but Minister Michael Noonan has previously indicated that the Irish government would be open to discussions on a euro bond programme.
The Commission also proposes introducing a universal deadline for the review of national budgets each year. Commissioner Olli Rehn said today in Brussels that the 15 October is the preferred date.
Rehn also said that “any type of eurobonds would have to go in parallel, hand in hand, with a substantially reinforced fiscal surveillance and policy coordination”:
Stability bonds would require that any step in the further sharing of risk would have to be balanced by provisions that ensure sustainable public finances and avoid free-riding on the consolidation efforts of other member states.
Germany has not been a keen supporter of the euro bonds project, fearing the joint venture would drive up its own borrowing costs. Speaking today, Chancellor Angela Merkel said she doesn’t believe that investor confidence in the eurozone can be repaired “purely financially”, but that the bloc needs a “coherent political answer”.
- Additional reporting by the AP
To embed this post, copy the code below on your site
have your say