The Blue Bond proposal, published in May 2010 (Bruegel Policy Brief 2010/03) suggests that sovereign debt in euro-area countries be split into two parts.
The first part, the senior ‘Blue’ tranche of up to 60 percent of GDP, would be pooled among participating countries and jointly and severally guaranteed. The second part, the junior ‘Red’ tranche, would keep debt in excess of 60 percent of GDP as a purely national responsibility.
This paper revisits the proposal, discusses its implications and addresses some of the comments and criticisms received in response to the proposal.
This paper was prepared for the European Parliament’s Economic and Monetary Affairs Committee, session of 21 March 2011 on the interaction between bank and sovereign debt resolution. Copyright remains with the European Parliament at all times.
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David Weller 20th August 2011
I feel the need to leave a comment as previous comments have merely heaped praise upon the blue bond concept and nothing more.
Imagine you go for dinner and instead of paying for what you owe you split the bill equally; will you, as a group, pay more or less?
Secondly, the 60% level is reasonable, and prior to the crisis many nations were at this level, Spain still is but finds itself in crisis. If another credit crunch were to occur, wouldn't finances have to be stretched beyond a mere 60%? Germany for instance is currently at 80%.
This is not to say I don't agree with the other argument for eurobonds but merely that it is unlikely to be the silver bullet suggested by the authors and, so far, those who choose to make comments.
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Rodolphe Ranouil 30th March 2011
I only wish EU political leaders were that visionnary. There is a silver bullet but the will and the energy to melt it are distinctly lacking.
My best regards for this superb idea
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