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Stability bonds: An option that must be further explored


15 Feb 2012


Euro & Finance

Today, through a resolution, the European Parliament gave a first response to the official consultation launched by the European Commission last November 23rd 2011 on the "feasibility of introducing stability bonds". On the same topic, the EP has also decided to produce a report with more detailed recommendations on the Commission's work in producing a more concrete proposal in the future.

Sharon Bowles (LibDems, UK), Chairwoman of the Economic and Monetary Affairs committee said: "Despite the contrasting views in support of common stability bonds, we believe they are part of the picture in our attempt to stabilise the Eurozone crisis. We must acknowledge that what we do marks the level of ambition and commitment to the next stage of evolution of monetary union and to the Euro's place as a reserve currency. With regard to ambition, stability bonds would show that there is a medium term plan beyond austerity".

Sylvie Goulard (Modem, France), EP rapporteur on the forthcoming report and ALDE coordinator on the Economic and Monetary Affairs committee said: "The Commission has responded promptly to the need to examine the merits of a form of eurobond as a tool to end the sovereign debt crisis and to strengthen stability at the global level". Indeed, when adopting the legislative acts on economic governance (6 pack) last September 2011 the EP called on the Commission to assess the possible creation of an EU bond market, whose ultimate purpose, according to Mrs Goulard: "should be to incentivise Member States to respect budgetary discipline".

"The crisis requires us to investigate all possible options, including the introduction of stability bonds by conceiving a reasonable roadmap. Some solutions like the redemption fund proposed by the German economic council should be introduced in the short term. Beyond tools to reduce debt, we need to look carefully at the necessary sequencing: a sustainable fiscal framework, that the 6 pack and the treaty have begun to put in place, is required for a common issuance of bonds".

By signing off the resolution today, the Parliament has officially considered the Commission's proposal represents a useful starting point but none of the three options presented are a panacea per se to the current sovereign debt crisis, concluded Mrs Goulard: "Our message is crystal clear. The Commission must continue its reflection. We will set out a roadmap ourselves through the report for ensuring long-lasting stability, in Europe and worldwide, drawing the advantages of a reserve currency backed by a liquid, deep market".

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