Explainer: What are 'coronabonds'?

Video Credit: Reuters Studio
Published on April 20, 2020 - Duration: 01:41s

Explainer: What are 'coronabonds'?

The coronavirus pandemic has revived the acrimonious debate between euro zone countries about jointly issuing debt to meet healthcare needs and address the deep economic downturn that is set to follow.

Francesca Lynagh reports.


Explainer: What are 'coronabonds'?

This is expected to be the European Union's deepest ever recession.

But how could 'coronabonds' get the economy back on its feet?

And what exactly are they?

The idea is to issue joint debt for euro zone member states.

That means the interest rate would be lower for many member states than if they borrowed alone.

Nine of the 19 countries that share the euro have called for such a solution.

These include Spain, Greece, and Italy.

(SOUNDBITE) (Italian) ITALIAN PRIME MINISTER, GIUSEPPE CONTE, SAYING: "... A fund that must be financed with a real economic sharing of the effort, such as with euro bonds.

Yes, the euro bonds, the famous euro bonds.'' But other, richer countries in northern Europe, such as the ‘Frugal Four’ - Germany, Netherlands, Austria and Finland - are not so keen to pool liabilities with what they see as more spendthrift countries in southern Europe.

It’s a highly controversial issue that has been discussed before - proposed by Italy during the global financial crisis in 2009.

And again by France and Italy in 2012 at the peak of the euro zone’s sovereign debt crisis.

But was dismissed by Berlin and its allies then.... and now.

(SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING (ON EUROBONDS): “You know I don’t believe in mutual responsibility in the current state of our political union and that is why we are rejecting that.

But there are many other ways to show solidarity and I think we can find good solutions." National leaders of the EU member states will debate the matter by video link on April 23.

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