It would probably take more time to create a financial vehicle capable of issuing joint European debt – or something that resembles the infamous coronabonds – than it will lead, according to what some experts have said, to create a vaccine against the new coronavirus. In an interview with the Financial Times, this Tuesday, Klaus Regling, the director-general of the European Stability Mechanism, throws a “bucket of cold water” on those who see the joint issuance of debt in the eurozone as an urgent solution to the crisis. Create, assemble and make operational an emission mechanism coronabonds it would take “one, two or even three years”, ensures.
A conference call for finance ministers from the euro zone (the Eurogroup, led by Mário Centeno) is scheduled for April 7 to discuss the options available for collaboration in combating the crisis, but Klaus Regling argues, right now, that any measures will always have to pass through existing vehicles – from the outset, the European Stability Mechanism (ESM), which he led, which was created after the last European crisis. The difference with coronabonds is that receiving money from the ESM will always go through a specific program for each country, with more or less conditionality (read austerity measures), and it will be a debt that will add to the specific indebtedness of each State.
It would take one, two, or three years to create a new European institution to issue joint debt – and member states would have to deliver capital or guarantees, or pledge revenue [fiscais] future… It is not possible to create debt securities from the air… ”, says Klaus Regling.
Even so, in the opinion of the German Klaus Regling, if the intention is to cover short-term financial needs, to invest in health or to support economies, “I think the only way out is to use existing institutions, with the mechanisms that already exist“. MEE’s “firepower” is around 410 billion euros, but Regling says that the existing European institutions have already issued a total of around 800 billion euros in debt that can be considered “mutualized”. “There is a lot of money that is already available“, ensures.
Despite arguing that, in the short term, any solution must go through the existing mechanisms, Regling admits that “in the long run, there may be other options“.
The director-general of the ESM adds, however, that if the fear of countries that may need loans from the ESM is that they will have to submit to conditionality (basically, austerity measures), Regling says he anticipates that any program would only include very limited conditionality – although he recognizes that it will not be possible to reach consensus quickly, among European countries, on how to adjust the available instruments and adapt the associated conditionality.