In Europe, which has now been termed as the new epicenter of the coornavirus pandemic by the World Health Organization (WHO), there is increasing pressure on policy makers to announce new measures to address the economic impact of the pandemic.
Calls for issuing the so-called corona bonds — a new debt instrument that would combine securities from different countries, was given to member countries of the European Union by nine European countries.
For the 27 member EU, the issue of coming up with corona bonds has been a controversial point of discussion. The idea of issuing of debt has been opposed altogether by the conservative policymakers in countries such as Germany, the Netherlands and Austria because of the highly leveraged countries in Europe such as Italy, Greece and Portugal.
However, currently, the coronavirus crisis has gripped Europe as an number of countries having been placed in national lockdowns. More than 182,000 coronavirus cases have been confirmed in Europe as of Wednesday morning.
“We need to recognize the severity of the situation and the necessity for further action to buttress our economies today,” the heads of state of Italy, France, Belgium, Greece, Portugal, Spain, Ireland, Slovenia and Luxembourg said Wednesday in a joint letter that has been seen by the media.
All of the key EU countries have been brought to a grinding halt by the coronavirus pandemic and most people in such countries have been forced to stay at home because of lockdowns. Governments have closed down places of gathering such as restaurants, cinemas and other retail spaces. All airlines have virtually been grounded. The number of people dying of the virus attack is also increasing across the continent with the highest number of deaths being reported from Italy which has not surpassed China – the original epicenter of the pandemic, in terms of the number of deaths.
“We need to work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all Member States,” the nine heads of state said.
There is the calls by the nine countries have put pressure on the 27 leaders of the European Union who are to hold a crucial meeting on Thursday and adds pressure to countries like Germany and the Netherlands that have dismissed the very idea of issuing a debt bond.
This is however not the first time that the topic of issuing joint debt has cropped up in the EU. This issue was discussed between EU countries at the zenith of the sovereign debt crisis of 2011. But there were some countries that were of the strong opinion that it would be too risky to combine their debts with the debts of some of the other more indebted countries which are considered to have a higher risk of defaulting on debt.
“The case for such a common instrument is strong, since we are all facing a symmetric external shock, for which no country bears responsibility, but whose negative consequences are endured by all,” the nine leaders said.
(Adapted from CNBC.com)