New ideas: briefing by Friedrich-Ebert-Stiftung on Eurobonds
In their briefing for the Friedrich-Ebert-Stiftung, Andrea Boitani and Roberto Tamborini outline a Eurobond issue proposal of a scale capable of effectively taking on the health and economic crisis in all countries and initiating a recovery, while at the same time creating the safe asset that Europe and its financial system so desperately need.
Their proposal consists of the following eight points:
1. Any Eurobond issue will have to be shored up by a guarantee. We believe that this guarantee must be new and shared. It must not touch states’ capital, the capital that currently guarantees their national public debts and must be supplied by the European Union with its dedicated fiscal capacity. It could take the form of a special purpose fund within the EU budget.
2. This fund would be fed by a yearly »citizenship contribution« proportionate to the number of adult citizens in the Union, which would thus distribute the burden equitably among member countries.
3. The citizenship contribution would be calculated by multiplying each adult citizen (>18) by 50 euros. Estimating that adults constitute approximately five-sixths of the total population, the revenue for the EU would be around 18.5 billion euros per year. For example, Italy would contribute 2.5 billion euros, Germany 3.46 billion, France 2.8 billion, Spain 1.9 billion and so on.
4. This fiscal capacity would be used entirely to guarantee the payment of interest on fixed-coupon open-ended or very long-term Eurobonds (perpetuities or consols) and would be inter-generational (100 years).
5. In the case of perpetual bonds, at an interest rate of 1% it would be possible to issue up to 1,850 billion of these Eurobonds, including in various instalments. At a 2% interest rate up to 925 billion could be issued (bn 18.5/0.01=bn 1,850; bn 18.5/0.02=bn 925)
6. Interest rates and contributions could be indexed if inflation goes over 2% (1%) in order to ensure a positive yield.
7. Spending the revenues collected from issuing these Eurobonds would be based on a programme decided on and controlled by the Commission, proportionately to each country’s adult population. This would amount to around 125 billion euros for Italy, 165 billion for Germany, 139.5 billion for France and over 97 billion for Spain, with a 925 billion issue and double that for a 1850 billion issue.
8. Each European citizen’s initial contribution would thus be multiplied by 50 or 100 (depending on the interest rate), making right away per capita spending of 2,500 euros possible. It is a very high multiplier, which would transform a small initial fiscal effort into an extraordinarily profitable investment.
Furthermore, they put eleven ideas up for discussion.
If you’re interested, learn more here: http://library.fes.de/pdf-files/bueros/rom/16779.pdf
Ecco il briefing in lingua italiana: http://library.fes.de/pdf-files/bueros/rom/16780.pdf
Hier geht es zum Briefing in Deutsch: http://library.fes.de/pdf-files/bueros/rom/16778.pdf