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Abuse of Coronavirus Crisis for Eurobonds.

The European Union uses the corona crisis as an excuse to create Eurobonds. After a bill on EU Green Deal, the EU has another genius idea that will cost a lot of money for the northern member states. The plan to save the economy in Europe is the Eurobonds.

Eurobonds is a common European debt. They are European bonds. Each country can then no longer issue bonds separately, but only together. This would benefit southern European countries such as Greece, Italy and Spain. These countries pay high interest rates on government bonds, which weights heavily on their budgets. With the Eurobonds, the interest they would have to pay would be much lower. The interest rate would become the average of all current interest rates of the EU member states.

Northern member states are not pleased with idea of Eurobonds. Countries such as the Netherlands and Germany will have to pay higher interest rates because of the introduction of a Eurobond. Not only are the countries against the Eurobonds because they have to pay more, another important reason is the financial market. The market acts as a kind of 'guardian' for the budgets of the government. When Italy has large budget deficits it has to borrow extra money. In this way, the financial market keeps the governments in line. So when a country spends a lot more money than it earns, the interest rate rises. Because of the Eurobonds this controlling function of the market would lapse.

The Eurobonds will enable the EU to create debts that are jointly borne by all euro countries. There will then no longer be a limited budget for support measures: this budget will be unlimited. Moreover, this calls for more Europe-wide solidarity. It is possible that this solidarity should become much greater, because if a country goes bankrupt, the costs will also have to be borne collectively.

Granting Brussels the right to issue Eurobonds would mean transferring the power to levy indirect taxes and to pursue policies financed by its own debt securities.

The supranational organization seems to be growing strongly and the power of the member states seems to be fading more and more into the background. It is as if the EU cannot get enough power.

Written by Monica Yelinyan

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