Analyst: There are better ways to help countries than common Eurobonds

Swedbank Estonia chief economist Tõnu Mertsina.
Swedbank Estonia chief economist Tõnu Mertsina. Source: Siim Lõvi/ERR

Estonian politicians and analysts believe there are other, better measures to help European Union member states in need rather than issuing a common Eurobond, dubbed a "corona bond". The European Council will discuss the subject next week.

Euronews website explained corona bonds as: "joint debt issued to member states of the EU. The funds would be common and would come from the European Investment Bank. This would be mutualised debt, taken collectively by all member states of the European Union."

Nine EU countries have called for such bonds to be issued: Spain, Italy, France, Belgium, Luxembourg, Ireland, Portugal, Greece and Slovenia.

A common Eurobond would mean money would be borrowed jointly, but it could be used by financially disadvantaged countries, ETV's "Aktuaalne kaamera" reported on Wednesday night.

"This is an old wish that Southern Europe can make its loose fiscal policy in solidarity with others. I think we should not let this happen now," said Jürgen Ligi, a member of the Finance Committee and a member of the Reform Party.

The government is of the same opinion.

Prime Minister Jüri Ratas (Center) said: "Here, the European Union Affairs Committee of the Riigikogu has sent a clear message that if we talk specifically about corona bonds, we do not think that this is the best measure. But the European Union will never leave its Member States in trouble, and I am absolutely convinced that those countries that have been hit hard - Spain, Italy and also Belgium - if assistance is needed, it must be provided. Then other measures must be found, other ways."

Ratas said the dissenting opinion of the member states on the issuance of joint bonds is so great that overcoming it at next week's council is not realistic.

Swedbank's chief economist Tõnu Mertsin said there are already several opportunities to support countries in distress.

"There are already a number of support options. It is then through the European Stability Mechanism, through the investment bank. There are also very large sums of money currently being brought to the euro area by the European Central Bank. These support measures are actually quite large at the moment," Mertsina explained.

He said it might be worth considering more options on how to guarantee state loans.

"The problem with creating such an additional joint bond at the moment is that it takes a lot of time," he added.

Another unanswered question is how investors would view such a product and what the interest would be in it.


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Editor: Helen Wright

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