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Mutualizing Euro Area debt without a Fiscal Union

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  • Krause Montalbert, Stefan

Abstract

Several years have passed since the onset of the most recent financial crisis, and Europe is still not “off the hook.” A twin crisis emerged: the sovereign debt crisis. The main objective of this paper is to design a mechanism for pooling Euro Area debt together, in order to lower short-term interest rates, and limit the risk of contagion. This design, which draws from existing proposals for jointly issued bonds in the Euro Area, contains features that would make it acceptable for participants (such as no ex-ante fiscal transfers across countries, and widespread benefits from lower debt-service payments), while placing a reasonable cap on potential losses from default by other participants through limited liability.

Suggested Citation

  • Krause Montalbert, Stefan, 2018. "Mutualizing Euro Area debt without a Fiscal Union," Revista de Ciencias Económicas, Instituto de Investigaciones en Ciencias Económicas, Universidad de Costa Rica, vol. 36(2), July.
    • Handle: RePEc:rce:rvceco:35688
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    File URL: https://revistas.ucr.ac.cr/index.php/economicas/article/view/35688
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    References listed on IDEAS

    as
    1. Michael Ehrmann & Marcel Fratzscher, 2015. "Euro Area Government Bonds: Integration and Fragmentation during the Sovereign Debt Crisis," Discussion Papers of DIW Berlin 1479, DIW Berlin, German Institute for Economic Research.
    2. Jakob von Weizsäcker & Jacques Delpla, 2010. "The Blue Bond Proposal," Policy Briefs 403, Bruegel.
    3. Daniel Brou & Michele Ruta, 2011. "Economic Integration, Political Integration Or Both?," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1143-1167, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Euro Area; sovereign debt crisis; monetary policy; Eurobonds; Zona Euro; deuda soberana; política monetaria; euro-bonos;
    All these keywords.

    JEL classification:

    • A - General Economics and Teaching

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