Larger economies within the EU are already showing signs of slowing down. We implore the EU leaders to use the European Stability Mechanism (ESM) for a joint debt issuance (Eurobonds) with minimal conditions to help all EU states get through this crisis financially. This will help counteract the economic damage caused by COVID-19 and is the best short-term solution. This crisis knows no borders, and neither must we—now is the time to stand up and show that Europe will weather the storm together.
The current agreements fall short in addressing Europe’s economic slowdown which will require public expenditures of at least €1-2 trillion (an estimated 10% of GDP) to recover. [1] European governments must be able to provide adequate financial support for their citizens and businesses in order to provide relief and stabilise the economy.
These programmes will be costly and some member states, especially those heavily impacted by the 2008/09 financial crisis, will not be able to provide enough support for their people and businesses to recover. If some member states fail to weather the storm, we all will pay for this economically and politically. As such, Corona Eurobonds ensure economic solidarity and solidify our resolve to work together.
Corona Eurobonds: “Corona-credit line” and Liquidity programmes.
In order to set up a “corona-credit line” quickly and efficiently, the European Stability Mechanism (ESM) and the European Investment Bank (EIB) should issue one-off bonds, which many are referring to as “Corona-bonds”. These bonds should be guaranteed jointly by all member states to finance two recovery programmes.
The first programme is a large line of credit issued through the ESM, and the conditions to access this credit line should be minimal. In order to spread out the overall costs, we propose a maturity of 30+ years. The same conditions should be applied to the established ESM-programmes “Precautionary Financial Assistance” or “Sovereign Bailout Loan”.
The second programme is to provide liquidity for firms who are suffering financially. The EIB funds should offer loans to firms, under similar requirements as the ESM. Fines can deter illegitimate use, however we should prioritise rapid access to loans in order to help the Europeans who have been directly affected by the Corona Crisis.
This crisis underlines the need for global cooperation. Brexit is a step away from. That’s for later, however. Now we need to save lives and mitigate the financial downturn, as best we can together.
[1] https://clausen.berkeley.edu/wp-content/uploads/2020/03/COVID_2b.pdf
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