Saturday

28th May 2022

Common debt fund needs EU treaty change: report

  • No eurozone debt fund without treaty change, says commission (Photo: EUobserver)

The EU treaties and democratic constraints block the way to establishing a fund to pool eurozone debt, according to a European Commission report released Monday (31 March).

The report by a commission expert group led by a former executive board member of the European Central Bank, Gertrude Tumpel-Gugerell, effectively kills off the prospect of a debt redemption fund being established in the near future.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

It concludes that it "may be considered prudent to first collect evidence on the efficiency of that governance before any decision schemes of joint issuance are taken."

The idea behind the redemption fund is that it would pool all eurozone government debt exceeding the 60 percent threshold in the bloc's stability pact. Each country would be responsible for reducing its debt pile by 3 percent a year for 20 years.

But the plan has met strong opposition from a number of governments, including Germany, anxious that debt pooling would leave their taxpayers liable for other countries' debts.

They also fear that such a fund would mean an increase in the interest rates paid by Germany and other countries with top credit ratings.

The report makes clear that the current EU treaties do not allow the bloc to set up either a debt redemption fund or a eurobills scheme through EU legislation.

Eurobills would involve the joint issuance of short-term government bonds, with maturities of between six months and two years.

"At most, absent treaty change one could argue that it is possible to set up a temporary eurobills scheme through a combination of an Article 352 regulation [on enhanced co-operation with an intergovernmental agreement]," it states.

Even then, however, "the EU's political institutions could not exercise any decision-making power".

Meanwhile, going the intergovernmental treaty route for a fourth time since 2010 would "present serious shortcomings and problems in terms of efficiency, democratic legitimacy and accountability".

"We have virtually exhausted the options under the current Treaty," said the bloc's economic affairs commissioner Olli Rehn in a statement.

MEPs had demanded the report as one of their conditions for supporting the EU's most recent economic governance legislation - known as the two-pack - in 2013.

Deputies were also keen on introducing a system of eurobonds in a bid to reduce the interest rates faced by the bloc's periphery countries.

However, with market pressures on government bond spreads greatly reduced since ECB boss Mario Draghi launched the bank's Outright Monetary Transactions (OMT) programme in the summer of 2012, which allows the bank to buy potentially unlimited supplies of eurozone government bonds, political demand for new measures has rapidly diminished.

MEPs struggle to keep Eurobonds idea alive

MEPs have kept alive support for joint liability Eurobonds despite critics describing the plan as "a socialist loonie-land" and a way to create a transfer union by the back door.

EU commission to present eurobonds plans next week

In a bid to stem the tide of the debt crisis engulfing the eurozone, the twin leaders of the European Union, Herman van Rompuy and Jose Manuel Barroso, have announced plans for further integration.

EU Commission extends borrowing curbs in 2023

The European Commission on Monday proposed to extend suspension of fiscal borrowing rule in 2023 — but advised prudence amid already rising real interest rates.

Commission grilled on RePowerEU €210bn pricetag

EU leaders unveiled a €210bn strategy aiming to cut Russian gas out of the European energy equation before 2027 and by two-thirds before the end of the year — but questions remain on how it is to be financed.

Commission grilled on RePowerEU €210bn pricetag

EU leaders unveiled a €210bn strategy aiming to cut Russian gas out of the European energy equation before 2027 and by two-thirds before the end of the year — but questions remain on how it is to be financed.

News in Brief

  1. Dutch journalists sue EU over banned Russia TV channels
  2. EU holding €23bn of Russian bank reserves
  3. Russia speeds up passport process in occupied Ukraine
  4. Palestinian civil society denounce Metsola's Israel visit
  5. Johnson refuses to resign after Downing Street parties report
  6. EU border police has over 2,000 agents deployed
  7. Dutch tax authorities to admit to institutional racism
  8. Rutte calls for EU pension and labour reforms

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic delegation visits Nordic Bridges in Canada
  2. Nordic Council of MinistersClear to proceed - green shipping corridors in the Nordic Region
  3. Nordic Council of MinistersNordic ministers agree on international climate commitments
  4. UNESDA - SOFT DRINKS EUROPEEfficient waste collection schemes, closed-loop recycling and access to recycled content are crucial to transition to a circular economy in Europe
  5. UiPathNo digital future for the EU without Intelligent Automation? Online briefing Link

Latest News

  1. EU summit will be 'unwavering' on arms for Ukraine
  2. Orbán's new state of emergency under fire
  3. EU parliament prevaricates on barring Russian lobbyists
  4. Ukraine lawyer enlists EU watchdog against Russian oil
  5. Right of Reply: Hungarian government
  6. When Reagan met Gorbachev — a history lesson for Putin
  7. Orbán oil veto to deface EU summit on Ukraine
  8. France aims for EU minimum-tax deal in June

Join EUobserver

Support quality EU news

Join us