Aitor Erce (affiliation unknown), Antonio Garcia Pascual (Johns Hopkins University) and Toni Roldán Monés (ESADE Centre for Economic Policy and Political Economy) for VOX: CEPR’s Policy Portal
The amount of financial resources needed to fight the COVID-19 is so large that most euro area member states will need a backstop from Europe.
This column discusses how to use the European Stability Mechanism toolbox to finance the fight, using Spain as an example. It shows that an ESM loan with low margins and a smoothed repayment schedule would stabilise debt stocks and gross financing needs, and that ESM financing could help Spain save around €150 billion in interest payments between 2020 and 2030.
A combination of bold ESM and ECB support could reinforce Spain’s debt sustainability after the COVID-19 shock, and could do the same for other member states.
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Labels:
COVID-19, coronavirus, European_Stability_Mechanism, Spain, debt,
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