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Remember that hot debate about eurobonds back in September? Well it looks like that possibility might be closer to reality than you might think.EU officials announced they would study the feasibility of creating common eurozone bonds at a press conference this fall, and now Reuters reports that the European Commission could introduce three different proposals for eurobonds this coming Wednesday, citing a senior eurozone official.
According to the report, these proposals would be considered alongside two suggestions on increased financial regulation for sovereigns. The first would force countries receiving aid from the European Commission to undergo more stringent monitoring, and the second would allow the Commission to interfere governments’ budget drafting.
While details remain unclear, Reuters says there are three plans being aired for eurobonds:
The first option is issuance of euro zone bonds with joint and several guarantees, which means euro zone countries not only issue bonds together but all are liable for each others’ debt.
The second option in the Commission study builds on the proposal of blue and red bonds by the Bruegel think-tank and a proposal by the German panel of economic experts.
It envisages joint and several issuance up to a certain limit, like the 60 per cent of GDP debt threshold in the EU treaty, above which countries would be responsible for their own debt.
The third option would be several, not joint guarantees — it would entail coordination of issuance and its terms, would bring better liquidity and transparency to the euro-denominated bond markets, but would not mean a eurobond as such.
But don’t get your hopes up just yet. According to the officials source, enacting these proposals would probably take years.
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