Author: Philip Lane

Eurobonds have returned to the forefront of the euro debate.  There are many varieties of eurobonds.  Some have been designed to mitigate the moral hazard risks that concern German officials (and many others).  The euro-nomics group (of which I am a member) have been advocating the concept of “European Safe Bonds” (ESBies) that does not involve joint and several liability, while other proposals have also been made.

Shahin Vallee recently made a presentation to the European Parliament comparing the main alternatives – the presentation file is here.

Jeremy Siegel points out in this FT article that a weakening in the external value of the euro can be important the recovery of the euro area;  Paul Krugman raises the objection that “… Europe as a whole, like America, remains a relatively closed economy. Its salvation must be mainly internal.”

Of course, trade with the rest of the world is a limited channel for the collective euro area.  However, it is important to appreciate that trade with the “rest of the world” is especially important for the peripheral countries, so that a substantial euro depreciation can be a contributory factor to the recovery process.  There is an interesting IMF paper that quantifies the role of external trade for the periphery countries – I will post a link once that paper goes online.

(The heterogeneous exposure of the periphery versus the core in relation to the external value of the euro was also much studied in relation to the very large euro depreciation against the dollar during 1999-2001. For instance, see this paper that I wrote with Patrick Honohan.)

Here.

Eamon Quinn has an interview with Peter Bacon on the WSJ website here.

Andy Borowitz proposes a solution for Greece here.