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16-01-2013

Careful pooling of sovereign debt is good for the Euro, say MEPs

A resolution to keep up pressure on the Commission and member states to explore all avenues for pooling sovereign debt was adopted on Wednesday. The text affirms that fears of free-riding can be overcome by carefully-crafted solutions, so debt pooling need not be automatically taboo. It also points out that the Eurozone is unique in having a single currency, but no common bond market.

The resolution, authored by French Liberal Sylvie Goulard and adopted by a show of hands, calls on the Commission to report on the various options for pooling debt, possibly accompanying this report with a roadmap for introducing them.

MEPs advocate setting up a European Redemption Fund

The resolution sets out various options. Some could be implemented immediately or in the medium term such as a European Redemption Fund, whereas common issuance of national debt or the creation of European debt would require a Treaty change.

Monetary union entails going further

The resolution notes that the Euro zone is in the unique situation of having a shared currency but no common bond market or common budgetary policy.  The Euro bloc's stability therefore depends on its completion, which is bound to have a positive effect on financial markets.

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