Analysis by Vincent Brousseau on March 22, 2020
The coronavirus epidemic has unexpected effects. It exalts the anti-euro partisans, it does not disarm the pro-euro supporters.
I can no longer count the tweets, emails and verbal statements explaining that this is the end of the euro zone. May Heaven agree with their authors, of course. But finally, the euro has a great force of inertia, we know it only too well.
What is more curious is that the effect is the same on the pro-euro supporters. To hear them, or rather to read them, this continental health crisis would be an opportunity to precipitate certain reforms which they seem (rightly) able to reinforce the meager chances of survival of their darling euro. In short, good would come out of evil.
The last speech in this direction relates to an innovation called « coronabond ».
The French newspaper « Le Figaro Economie » headlines on March 18, 2020:
« Paris and Rome are calling on European coronabonds to finance the crisis.
Joint debt issues would make it possible to pool financial risk in the European Union. »
What is it about ?
It should be noted at the outset that the coronabond is not a firm decision. It is just a word, a concept, wishful thinking, a project under study.
It is so called because its pretext is the major health crisis caused by Covid-19, of the coronavirus family. But it is supposed to represent the salvation of the euro.
Why, then ? Because it is supposed to be a joint debt of the Public Treasuries of the euro area. This objective of absolute financial solidarity between the countries of the euro zone has become the Grail for the pro-euro, generally non-Germans.
But this pooling of debts was the subject of a spectacular rejection by Merkel in 2012. She then exclaimed that this would never be done in her lifetime to which her interlocutors, executives of the Liberal party FDP, had replied in chorus laughing: “We wish you a long life ! ”
Joint debt, or solidarity debt, is for example what happens when 3 students rent an apartment while being “jointly liable”. This means that the landlord is entitled to demand from any of his 3 tenants the full rent, not just his share of a third.
We know an example of solidarity debt in the case of the euro (at least, those who read me regularly know it): it is the euro banknote. A 100 euro banknote is a joint and several debt of all the central banks of the euro zone; that is to say, you can present it to the Bundesbank and it must credit your account with it for the whole amount of 100 euro, not just what would be its theoretical share, 22 euro and some.
In the same way, a “bond” jointly and severally issued by the Treasury of one of the states of the euro zone (Italy or Greece for example) could be presented, at its expiration, to the German Treasury which should repay the total amount. And not just a fraction….
We understand why Merkel is against, and with it an overwhelming part of the German elites and the German people: they all fear to become the eternal cash cow of what they perceive as the traditional spending laxity of the countries of southern Europe.
But obviously, as such a system would make the euro seriously difficult to break, the pro-euro supporters are for, above all, especially if they are not Germans. All of this is very logical.
We therefore understand the discreet jubilation, in the pro-euro camp, of this perspective, opened by the hecatomb of coronavirus deaths: Yes, the coronabond “breaks the taboo” of the joint debt, so it is wonderful, the euro will survive.
BFMTV, a French mainstream media, immediately echoed this euro worshipping point of view by presenting the coronabond project as “debt pooling” and the “taboo that is collapsing”:
« Is the debt pooling in the euro zone, a taboo on the verge of collapse ?
Italy has proposed the creation of corona bonds, bonds that would pool the debts of countries in the eurozone. Supported by Paris, this initiative, if it materializes, would be a real revolution within the continent. But it is still necessary to obtain the agreement of the exemplary partners, and in particular that of Germany. »
(Source: https://bfmbusiness.bfmtv.com/monde/la-mutualisation-des-dettes-en-zone-euro-un-tabou-sur-le-point-de-s-effondrer- 1877427.html)
Except that it is not the case at all.
The European journalist from BFMTV seems to believe – or pretends to believe – that this coronabond project corresponds precisely to what Merkel had rejected “she alive”.
Maybe he thinks his readers and listeners will not take a closer look ?
But we take a less naive look.
As the penultimate paragraph of the article of BFMTV, unnecessarily nebulous, explains, the coronabond would actually be issued by the European Investment Bank (EIB), with the guarantee of the European Stability Mechanism (ESM).
It is therefore not at all the same thing as a co-issuance of bonds, involving the German government as a joint debtor (to which the creditor can present the entire invoice, and not just a predetermined fraction of it).
The “eurobonds” or “coronabonds” which non-German euro idolaters dream of are not at all an EIB issue guaranteed by the ESM. So there is no broken taboo, and BFM is just doing European propaganda, banking on the fact that these things are too complicated and the reader is not going to dig.
To which one could add that the outstanding amounts issued by this coronabond would necessarily be limited. But what matters is the principle: virus or no virus, there is still no plan on the horizon of the governments of the area for a joint program, except to play on words.
This is ultimately what matters: playing on words so as not to see that the European Union is dying – in principle as well as in its concrete achievements – this is the last palliative care of relentless Europeanists in these times troubled by a deadly epidemic.
We bet that there will still be (a little) question of the coronabond in the days to come. Before we probably won’t talk about it at all.
Vincent Brousseau on March 22, 2020
Translated by Etienne
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.