Stability bonds

Key points:

• The EESC believes that in order to resolve the crisis and avoid a prolonged recession, more Europe is needed, not less.
• This requires a strong determination on the part of the European Commission to reaffirm and implement the Community method. From this point of view, the Green Paper is welcome.
• Europe must combine solidarity, responsibility and shared confidence. This will foster fiscal responsibility and integration, restoration of long-term creditworthiness, and ultimately could facilitate the implementation of structural reforms and attract investments.
• As regards the various "options for issuance of Stability Bonds", the Committee believes that the approach which involves "partial substitution of Stability Bond issuance for national issuance, with joint and several guarantees" is the most practicable and overall the most acceptable option.
• The EESC shares the Commission's view that Stability Bonds must have a high credit quality to be accepted by investors and the Member States of the euro area. As underlined by the president of the European Council in his report "Towards a Genuine Economic and Monetary Union" of 26 June 2012, stability bonds can only be issued as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance. Progress in the pooling of decisions on budgets would be accompanied with commensurate steps towards the pooling of risks. The Committee agrees that the "building blocks" of this process should include integrated frameworks for the financial sector, budgetary matters and economic policy. These should be accompanied by a coherent and complementary framework of democratic legitimacy and responsibility at European level, without exacerbating austerity. The EESC proposes that the risk of moral hazard should be assessed closely by the Commission so that appropriate solutions can be found within this architecture.
• However, the EESC believes that the risk of moral hazard and its possible practical manifestations as described in the Green Paper are debatable and should first be subject to an in-depth analysis before coming to conclusions which may be questionable.