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The European Redemption Fund: A Comparison of Two Proposals

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  • Carmelo Pierpaolo Parello
  • Vincenzo Visco

Abstract

This paper proposes a redemption fund for the euro zone countries alternative to that recently proposed by Doluca et al. (2012a) - The European Redemption Pact: an Illustrative Guide, GCEE Working Paper No. 2, February - and in coherence with a previous proposal of one of the author. In doing so, we envisage a country-specific amortization scheme in which the sovereign debts exceeding the 60%-ceiling of GDP is redeemed in 30 years. The paper shows that our redemption scheme is cheaper and less constraining than that proposed by Doluca et al. (2012a). Also, the paper shows that fiscal «brakes» - such as those required by the Fiscal Compact - are not necessary for the complete redemption of the Fund.

Suggested Citation

  • Carmelo Pierpaolo Parello & Vincenzo Visco, 2012. "The European Redemption Fund: A Comparison of Two Proposals," Politica economica, Società editrice il Mulino, issue 3, pages 273-306.
    • Handle: RePEc:mul:je8794:doi:10.1429/74176:y:2012:i:3:p:273-306
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    1. Hasan Doluca & Malte Hübner & Dominik Rumpf & Benjamin Weigert, 2013. "The European Redemption Pact. An illustrative guide," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 341-367.
    2. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 30(82), pages 291-333.
    3. Jakob von Weizsäcker, 2010. "The Blue Bond Proposal," Bruegel Policy Brief 403, Bruegel.
    4. Hasan Doluca & Malte Hübner & Dominik Rumpf & Benjamin Weigert, 2012. "The European Redemption Pact: Implementation and macroeconomic effects," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 47(4), pages 230-239, July.
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    Cited by:

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    2. Lorenzo Esposito & Giuseppe Mastromatteo, 2019. "Defaultnomics: Making Sense of the Barro-Ricardo Equivalence in a Financialized World," Economics Working Paper Archive wp_933, Levy Economics Institute.
    3. repec:hal:spmain:info:hdl:2441/c5gs2rgi93abt1s4jkeabou1 is not listed on IDEAS
    4. Silke Tober, 2014. "Debt Redemption Fund: Conditio Sine Qua Non? Government Bonds in the Euro Area Crisis," IMK Working Paper 131-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    5. D'Andrea, Sara & Vassalli, Federica, 2022. "The Uncertainty of Fairness: a Game Theory Analysis for a Debt Mutualization Scheme in the Euro Area," MPRA Paper 114690, University Library of Munich, Germany.
    6. repec:spo:wpmain:info:hdl:2441/c5gs2rgi93abt1s4jkeabou1 is not listed on IDEAS
    7. Fabrizio Balassone & Sara Cecchetti & Martina Cecioni & Marika Cioffi & Wanda Cornacchia & Flavia Corneli & Gabriele Semeraro, 2018. "Economic governance in the euro area: balancing risk reduction and risk sharing," Chapters, in: Giuseppe Eusepi & Richard E. Wagner (ed.), Debt Default and Democracy, chapter 7, pages 124-154, Edward Elgar Publishing.
    8. Catherine Mathieu & Henri Sterdyniak, 2019. "On public debt in the euro area," SciencePo Working papers Main hal-03403548, HAL.
    9. Marika Cioffi & Pietro Rizza & Marzia Romanelli & Pietro Tommasino, 2019. "Outline of a redistribution-free debt redemption fund for the euro area," Questioni di Economia e Finanza (Occasional Papers) 479, Bank of Italy, Economic Research and International Relations Area.
    10. Xavier Timbeau & Ofce Observatoire Français Des Conjonctures Économiques, 2014. "From austerity to stagnation how to avoid the deflation trap," SciencePo Working papers Main hal-03603164, HAL.
    11. Gustav A. Horn & Alexander Herzog-Stein & Ansgar Rannenberg & Katja Rietzler & Silke Tober & Peter Hohlfeld & Fabian Lindner & Sabine Stephan, 2013. "Krise überwunden? Prognose der wirtschaftlichen Entwicklung 2013/2014," IMK Report 86-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    12. Silke Tober, 2015. "Monetary Financing in the Euro Area: A Free Lunch?," IMK Working Paper 152-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. repec:hal:spmain:info:hdl:2441/pm9j25k5p9bc8fsjhn1ov51ca is not listed on IDEAS
    14. Gustav A. Horn & Alexander Herzog-Stein & Peter Hohlfeld & Fabian Lindner & Ansgar Rannenberg & Katja Rietzler & Sabine Stephan & Silke Tober, 2014. "Deutschland im Aufschwung - Risiken bleiben," IMK Report 91-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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    More about this item

    Keywords

    Sovereign debt crisis; Public debt; Amortization schedule; European redemption fund.;
    All these keywords.

    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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