Health / Finance / Europ / European Macroeconomics & Governance / coronavirus / COVID-19 / European Central Bank / European Council / fiscal policy

ESM credit lines, ‘corona-bonds', Euro-area Treasury, One-off joint expenditures: What are the options for the EU Council?

Posted On: Mar 26, 2020   |   Posted By: Bruegel

As the Covid-19 pandemic intensifies and now that Europe has become the epicentre of the pandemic, voices are being raised among EU Member States in support of a common and significant European response to deal with the health situation and the related economic crisis currently unfolding.
Many options are currently discussed in policy and academic circles: ESM credit lines, ‘corona-bonds', a euro-area Treasury, and even one-off joint expenditures. But, at this stage, these various options are relatively fuzzy and they sometimes mean different things to different people. This blog post aims to distinguish and explore the pros and cons of each of these different possible options at the current juncture.
Option 1: Hoping that the status quo will be sufficient
Euro-area countries finance their necessary expenditures to fight the health crisis and the resulting economic crisis, through a significant increase in national borrowing. This is supported by massive ECB QE to...

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