“Some years ago, we were one, maximum two Governing Council members arguing in favor of eurobonds,” Stournaras recalled. “The rest of us thought, ‘You are coming from the European South, so it’s understandable.’ But now we have all realized how important it is.” Now, even Germany’s Bundesbank, the de facto leader of the skeptics, has turned.
As Stournaras sees it, the fact that southern EU countries that were teetering on the brink of bankruptcy a decade ago are now performing well has helped to shift views. Certainly, the subsidy from Berlin to other capitals that is implicit in joint borrowing has shrunk sharply. The infamous “spreads,” which represent how much more Greece and Italy had to pay than Germany to borrow for 10 years, now stand at less than 1 percentage point.
Investor appetite
The most powerful argument, however, is a clear message from investors that all of Europe will benefit from joint debt, Stournaras argued.
“If you talk to any important wealth manager, either in Europe or in the United States, and ask her why most of the current account surplus we have in Europe is flowing abroad, she will tell you that the lack of sufficient safe assets is the critical issue,” he said. “It is even more important than the rate of return.”
Joint issuance should serve “well-defined common European purposes,” Stournaras said. “You have three common needs in Europe that can be funded commonly. Defense, green transition, innovation.”
Advocates of joint borrowing argue that a more liquid market for safe euro assets will enhance the region’s relative attractiveness for global capital, at a time when the reliability and desirability of dollar assets are coming under increasing scrutiny. Competing with the dollar for global reserve currency status could ultimately — if only gradually — lower the cost of borrowing and investing for governments, companies and households.