The establishment of a system of Eurobonds, whereby bonds are issued on behalf of the Eurozone as a whole, has been proposed by many commentators as a way of ending the European sovereign debt crisis. Political proponents include Jean Claude Juncker, Giulio Tremonti, Guy Verhofstadt and even George Osborne. Opponents include Otmar Issing, Jan Kees De Jager and, crucially, Angela Merkel.
Europe’s financial, sovereign debt and political crisis shows no sign of abating and could yet trigger a fresh global catastrophe. The range of endgame options runs from a costly and contentious closer union among members of the Eurozone to its chaotic fragmentation. There are no good solutions, and no agreement on what might be the least-worst one.
The European Central Bank has had a difficult time since the onset of the European sovereign debt crisis. Forced to step into a political vacuum caused by the failure of the European Union’s traditional policymaking process to get to grips with extraordinary events, it has tried to balance the sometimes competing demands of safeguarding the Euro, supporting the financial system, nurturing economic fundamentals and protecting its own integrity.
The resolution is non-legislative but nonetheless is a strong demonstration of the European Parliament’s hopes for radical action to boost European competitiveness, employment, innovation and growth in the years ahead.
We have had the hamartia – the tragic flaw in the system that allowed high-spending countries to free ride on low interest rates. We have had the hubris – the belief the good times would never end. We have had nemesis – disaster. We now need the anagnorisis …
So says the proud Eurosceptic, classical scholar and Mayor of London, Boris Johnson. But the epiphany for which he yearns is “the moment of recognition that Greece would be better off in a state of Byronic liberation, forging a new economic identity with a New Drachma. Then there will be catharsis, the experience of purgation and relief.”
A trio of leading economic experts have addressed the IIEA in recent weeks on the topic of Ireland’s sovereign debt crisis. Tellingly, each of them spent as much time speaking about the European dimensions of Ireland’s problems and their solutions as they did talking about domestic factors.
A comprehensive response to the European sovereign debt crisis must address the following tasks: crisis management, fiscal consolidation, financial stability, structural reform and strengthening the single market.
The last year has seen a wide array of proposals in these areas tabled by European institutions, politicians and think tanks. Many of the proposals overlap or represent variations on similar core ideas. This briefing outlines the nature, rationale and prospects of some of the most prominent of those ideas.
The proposals are diverse yet interconnected. For the purpose of this brief they have been divided into four main policy areas, subdivided into twenty actions. Particularly sensitive issues, such as treaty change, are addressed individually.
This briefing is not exhaustive and will be updated on a regular basis so as to provide a monitoring resource for interested parties.