Policy Briefs

C. Bastasin: WILL MERKEL CALL FOR EUROBONDS?

Quite unexpectedly, the next months might provide new momentum for Eurobonds. Although political coordination in the euro area is dismal and the spirit for constructive proposal is less than optimal, a specific financial fallout of the current economic crisis – the exceptionally low level of interest rates in Germany - might play in the hands of proponents of mutual issuances of government bonds in the euro area and be a game-changer for the future of Europe. Contrary to what is sometimes assumed, the German economy does not reap only benefits from a historically low level of interest rates. In fact the current exceptional monetary circumstances represent a severe challenge for part of the German financial system and reverberates on the efficiency of the domestic savings allocation.

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