The concept of Eurobonds as one tool to tackle the euro zone debt crisis has re-emerged onto the agenda this week. But how would they work and how could they help to solve the crisis?
First of all, any Eurobond, or e-bond, wouldn’t be the same as the existing eurobonds-with-a-small-e (note the potential for confusion). The latter are bonds which are issued in a different currency from the country in which they are issued (not necessarily in euros, either), and are often used by developing economies such as Nigeria and Ukraine to attract foreign investors.
A joint bond issued by euro zone countries, the Eurobond, could help some of its weaker members, as investors might be more willing to buy bonds from the entire region rather than, say, Italy or Spain. The bond market has been one of the key battlegrounds of the crisis, where countries such as Ireland and Greece have fought and lost the attempt to survive without bailout loans. A joint Eurobond could be, essentially, another way of allowing weaker euro zone economies to benefit from association with stronger economies. It could also bring the region’s fiscal integration closer.Page 1 of 4 | Next Page