By Silvia Marchetti
ROME (MaceNews) – Italy will push for the creation of a ‘permanent’ European-wide debt tool scheme to support growth in a post-COVID world alongside a common EU budget, according to ruling coalition sources.
“The eurobond issuance program adopted in the wake of the pandemic cannot be a one-off measure which will expire over the next few years, it is crucial that some sort of joint debt instrument is put in place to tackle future challenges,” said an official.
The COVID eurobond issuance is being used to finance the EU’s recovery fund pandemic aid to all member states, of which Italy is the largest beneficiary with nearly EUR200 billion out of a total of more than EUR 800 billion EU-wide. Rome is expected to receive a first tranche of roughly EUR23 billion starting in early July.
Sources argued that the recovery fund, which will be running till 2026, should be made permanent to give countries the necessary ‘safety nets’ should another emergency strike with long-lasting repercussions.
“Europe will be out of the economic emergency in no less than one year and a half from now, which means that before a stable economy is back on track it will take even longer. We’ve come such a long way to create eurobonds it would be absurd to shelf them when no longer needed,” said another official.
However, sources acknowledged that even though all EU members clearly supported the eurobond pandemic recovery fund, it might be tough bringing them on board for a long-term, permanent joint debt issuance mechanism.
“There’s still widespread mistrust among peer countries – the ‘virtuous’ frugal northern bloc versus the ‘lazy’ spendthrift southern one – on thorny burden-sharing issues such as sharing public debt, though we must make a distinction between two kinds of debt,” the official said.
“There is bad debt, linked to past piled-up debts by single national governments which should be left on their shoulders, and good debt such as investments and pro-growth expenditures adopted in times of extreme economic crises that strike all EU members, like the pandemic, which should be comprised in common eurobond issuance. Nobody is asking others to pay for a decades-long outstanding debt,” said the official.
The issue of introducing ‘structural’ eurobonds within Europe’s fiscal policy framework is strictly tied to the completion of the integration process, argued sources.
“Europe must rapidly adopt a single common budget, single taxation and single economy minister to ensure the efficient and smooth transmission of economic policy across the bloc, including the prompt issuance of eurobonds and monitoring how they’re spent,”, said an official. This would translate into making steps forward towards a European political union, a target eyed by Europe’s founding fathers since the end of the second world war and never implemented over fears of giving-up too much sovereignty.
A common budget, supported by a common currency and a common debt issuance scheme would reinforce the European Union’s economy by making it more resilient in the wake of sudden, worst-case scenario emergencies, said sources.
Rome’s government has repeatedly warned that the euro would greatly benefit from a common budget and political union. “The lack of greater European integration will continue to expose the single currency to the risk of reversibility at the hands of populist groups,” said an official.