Feasibility of introducing stability bonds
Delivered in Plenary - 16th January 2013
The eurozone crisis – which I actually wrote about as inevitable a decade ago – is an existential challenge to the European integrationalist project. It is therefore not surprising that European leaders – the ones most committed to further political union – will do whatever it takes to resolve this matter.
ECB President Draghi’s commitment to backstop the euro has given a temporary respite to the euro and the European sovereign bond markets but clearly more long-term fiscal union is now being planned to prevent the disruptions we have seen since 2008 in the bond markets. Debt mutualisation, or joint and several liability through the so-called stability bonds, is therefore a key concept to prevent a further run on indebted eurozone Member State governments.
The Goulard report looks at various options in this respect. However, I have some concerns about the report, particularly from the issue and point of view of moral hazard. There are insufficient safeguards to prevent over-borrowing by Member State governments, and there is also the possibility of default on legacy debt which is left behind. Nevertheless, I and other Conservatives regard this as a matter for the 17 eurozone states. We have serious reservations about the whole concept, so we voted against.