Brussels, 01/04/2014 (Agence Europe) - Experts selected by the European Commission to look at possible ways of pooling sovereign debt have stressed the “great political commitment” to be made by eurozone countries if they decide to go ahead and pool debt. The experts were speaking on Tuesday 1 April at the presentation of their findings at the European Parliament (see EUROPE 11050).
Former member of the European Central Bank's Executive Board, Gertrude Tumpel-Gugerell of Austria, who chaired the expert group, agreed with an approach taken by Euro Commissioner Olli Rehn - more European solidarity must go hand-in-hand with more budget surveillance. The more countries connect their fate with others, the more controls or guaranteed action are needed if things go wrong, she said. The idea of intervening in countries' budget policies if they do not keep their promises over a certain period of time was discussed by the experts. In order to deal with moral hazard (partial pooling of debt making a country feel it did not need to respect its obligations - Ed.), strict eligibility criteria could be set for debt mutualisation, said Vesa Vihriälä, director of Finnish research body ETLA.
British researcher Graham Bishop said a change would be needed in the treaty, along with strong political will to boost budget surveillance rules and he therefore suggested introducing very short-term eurobills by means of a regulation based on Article 352 of the EU treaty and an intergovernmental agreement. The decision-making process for sovereignty that is mutualised among the member states concerned should be an intergovernmental agreement, he said, with technical coordination taking place through the Community Method. Bishop said that if there was the necessary political will, eurobills could come on stream within a year. MEPs did not take kindly to the idea of an intergovernmental agreement.
Marianne Thyssen (EPP, Belgium) asked whether it would be better to have a more modest system achievable with existing political will or a radical change. Vihriälä said failing to act would be a risk, particularly in the event of new shocks to the economic system, adding that measures to tackle moral hazard should be introduced at the same time as mutualisation systems. Bishop suggested the following compromise - short-term action by means of eurobills, followed by amending the treaty to make it possible to introduce a redemption fund. Swiss economist Beatrice Weder di Mauro said that without pooling, there could be no effective fight against excessive debt, which could end up costing dear. Similar comments were made by Agnès Bénassy-Quéré, who warned that it was in everyone's interests for highly indebted countries to reduce their debt. (EL)