April 20, 2020
Written by WID.world

Coronabonds with or without Germany

Coronabonds with or without Germany

This paper, written by Lucas Chancel, explores the rationale and feasibility of debt mutualization among Eurozone countries, ie Coronabonds (e.g. France, Italy, Spain, and Belgium).  All Eurozone countries could participate (including Germany and the Netherlands), but it would also work effectively without German and Dutch support.

Key results

As such, the paper describes the practical steps in this direction:

  • Creation of a European Solidarity Treasury Agency emitting a new debt (or “Special Purpose Vehicle”) called “Coronabond-1”.
  • The debt issued would represent approximately 5% of participating countries’ GDP in 2020 (or €250 billion in the case of France, Italy, Spain and Belgium).
  • Setting of a debt repayment scheme via a novel European Solidarity Tax on Multinational Corporate Profits. It would also be effective should only a subset of Eurozone countries adopt it. It could reimburse the debt issued in 2020 in 4-5 years.

The tax would also act as a strong political and economic incentive for countries currently reluctant to join the initiative.

Click here to access the study.


The figure below illustrates the Italian spread despite a European Union response

Italian spread rising despite European Union response or coronabonds, World Inequality Lab
Source: Lucas Chancel, data from www.investir.com, Italian, April 17, 2020







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