For Michael Hüther, the case is clear. Eurobonds would “pretend to be a single European state” and would mean a “complete fiscal liability network”. That could only go wrong, argued the head of the Institute of German Business (IW), because the euro bond has a “negative incentive effect”.
If the sound economies in the north were responsible for the hallodris in the south, that would reward their lax spending policy. That was the argument of IW director Hüther 2011 when the banking crisis had turned into a euro crisis and the discussion about Eurobonds was boiling.
2020 is not comparable to 2011
Today Hüther sounds like this: “Without a joint crisis bond, I see black for the European Union.” The economist has changed his mind because the circumstances have changed and corona bonds would be interpreted differently than the Eurobonds discussed earlier. “The situation today is not comparable to 2011: At that time it was a question of whether one would like to permanently allow joint bonds for the fiscal architecture of the EU, today it is a question of a limited fiscal response on the corona crisis, ”Hüther told Tagesspiegel. “It's about solidarity, that wasn't the case back then.”
Scholz is just as opposed to Schäuble
The SPD finance minister Olaf Scholz also rejects joint liability and therefore a transfer to poorer countries that are particularly affected by the virus, as does 2011 the CDU finance minister Wolfgang Schäuble. The then federal government insisted on the no bailout clause, according to which no EU country is liable for the debts of other member states. The scope of the clause is, however, a question of interpretation or political will. EU Commission President Ursula von der Leyen believes that “all instruments” should be considered to combat the crisis, including joint corona bonds: “If they help, they will be used.” Really? Her predecessor Jean-Claude Juncker pleaded in vain for community bonds.
1000 Billion euros proposed
Times are different. “Regulatory policy also has to appreciate certain things in space and time,” explains Hüther. Together with half a dozen other German economists, he proposed a euro crisis bond with a volume of 1000 billion euros. In order to prevent the corona crisis from developing into a sovereign debt crisis, “a common strong signal to the financial markets is required that betting against the euro zone and individual member states makes no sense”. The 1000 billion euro pot could support the euro states, which would have to pay high risk premiums on the capital market. “Due to the joint liability, the debt of the most affected countries would increase comparatively little,” write the economists.
The role model is the oil bond 1975
All in all, the giant pot is a “one-time measure “And comparable to the joint bond from the time of the oil crisis. “Because of the oil bond in the middle of the 1970 years, the world didn't go under,” Hüther advertises the idea and flanked it with a moral appeal. “The EU should help save lives in Italy and Spain. It is a matter of life and death and not the financing of dams in central Italy, ”says the IW director and is on the same line with the assessment as the Italian Harvard economist Alberto Alesina.
“The argument that countries have made mistakes in their fiscal policies in the past, causing their citizens to die and their economy to collapse because of the corona virus, is not only immoral,” Alesina told the television station ntv. “It is also economically pointless because the collapse of some economies in the euro area will also have very bad effects on others. It would be the end of the European project. ”
Federal government relies on ESM
According to Hüther, the reference to the possibilities of the European rescue package ESM, as it comes from Olaf Scholz but also from other economists, is not adequate. The ESM tied aid to conditions. “It is not suitable for the current crisis.” Incidentally, the ESM would probably be needed “to create a safety net for banks in the euro zone”.
But the German government is concentrating on the ESM and is considering easing the conditions to allow countries like Italy to raise money without humiliating conditions. Is that enough?
Italians appeal to Germany
In a full-page FAZ advertisement to the “Dear German Friends”, Italian Prime Ministers, MPs and Mayors advertise for Eurobonds and commemorate nine countries (including France, Spain and Belgium) that also propose bonds. One does not demand the communitization of old debts, “but the provision of sufficient funds for a large European rescue plan”. After the war, Germans were shown solidarity by neighboring countries. “Reminder helps you make the right decisions,” says the ad, which Hüther could also sign. “The Berlin government parties are too rabid-footed on this point,” says the IW director.