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Graham Bishop's blog: A two-year refinancing for all € bill/most bond maturities until 2013 - An “EMU Bond Fund” Proposal from ELEC

Graham Bishop and Wim Boonstra presenting the proposal to EC President, Herman van Rompuy

Graham Bishop acted as Rapporteur for this report. The modest proposal is designed to provide a limited degree of mutual support that will be sufficient to allow adequate time to States that are themselves trying to restore their competitiveness. Then they can demonstrate to their creditors that the first fruits of good policies are visible, and that the policies are entrenched into their political structure in a way that limits the risk of sudden reversal.

  • After a euro area State’s economic policies have been approved by ECOFIN in the European Semester as both economically effective and politically durable;
  • Then all such States should pool their short-term borrowing via a Fund that would only last four years. The Fund would borrow in the markets for, at most, a two year term – to match the borrowing profile of its client States;
  • The borrowings of the Fund would enjoy a “guarantee” involving all participating euro area States. We are launching a survey to test the acceptability of different levels of guarantee – click here.
  • The fund’s capacity would be large enough to fund for the next two years all the maturing bonds of euro area States that were unable to access the capital markets on normal terms;
  • Interest surcharges would be applied to those States that breached the Stability and Growth Pact (SGP);
  • States that became subject to sustained SGP sanctions would cease to be eligible to borrow further from the Fund.

If the eurozone demonstrates that it  is on track to meet these initial economic (and political) goals of renewed competitiveness and sound public finance,  then its individual members will have a compelling story to tell the investors of the world.

Full text; Timeline and 3 Scenarios: click here.