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I assume Germany will veto this hard. We are very afraid of debt.
https://en.wikipedia.org/wiki/TARGET2
The intra-system balances.
The people don’t like dept but the politicians don’t mind.
TARGET2 has been replaced three years ago. It is essentially the payments mechanism for the euro. I don’t know why you post this here in this context.
Sinn points out that the option of self-rescue for the crisis-affected countries by drawing TARGET credit forces Germany to approve the formal rescue facilities and eventually to accept eurobonds as well.
On Wikipedia it’s later argued that it is wrong, and for T2 I don’t know the numbers, but Target2 seems to me like a hidden approval by Germany of taking the risk. What else is pooling dept?
And they think the north/western countries are willing to pay for the massive debt of the south/eastern countries?
Europe is not a country, or a United States, it’s a continent made up of sovereign countries each with their own budget.
Edit:
Author: Carlos Cuerpo
Wait a minute…. I see what’s going on here!
Pooling debt isn’t about some countries paying the debt for others but rather about borrowing at lower rates, while the debt will be repaid by the countries that raise/benefit from the funds. What the Spanish finance minister is saying here is essentially not new, the European Central Bank has been saying that for years as well as many experts, and the Draghi report proposed the same if I remember that right.
I see, but will that not make interest rate go up for the countries with lower debt/GDP ratio if the debt is pooled?
In principle this is possible, if and when all other circumstances remain unchanged, but this is very unlikely. First, there must be strong safeguards - such as strict fiscal rules, mutualized guarantees - which will mitigate upward pressure on interest rates for better-rated states.
But what is more important in my humble opinion are the new geopolitical and economic realities we are facing - like climate change, an aging population, immigration, the war in Ukraine, China’s coercive policies, etc. All these issues can and must be tackled together rather than in isolated/national measures. A joint defense bond, for example, would also solve the free-riding problem.
The urgency of further sharing public goods across EU countries will undoubtedly increase, and so it increasingly makes sense to share the burden. Some EU measures in recent years - such as the European Stability Mechanism (ESM) - are first steps to address these issues, although they do not (yet) offer the possibility of full debt mutualization. But we in Europe must take the next steps in this direction.
Well, the lesson takes long, but slowly it gets into the heads: can’t have a currency union without economic (and social) integration. The north/western countries also profit off a weak Euro. Nobody would buy German shit if they had to buy in Mark. That would be too expensive.
So pooling it will be one day, would’ve been saving some headaches if we already had it before the Greek crisis.
It’s also an entity that needs to recognise the world for how it is, which might mean working even tighter together.