Together with @lucasguttenbergand @GrundSebastian: a proposal for a European fiscal response. #Coronabond /thread https://voxeu.org/article/pandemic-solidarity-instrument-eu

We propose that the EU borrows 440 billion on markets, backed by guarantees. When the long maturity bonds come due, repayment is based on GDP shares *at that time* /2

The EU should spend the proceeds on
1) immediate health care costs: €20bn
2) EIB fund for liquidity scheme across Europe: €120bn to allow almost €1tr in support
3) short-time work and unemployment reinsurance: €100bn
4) recovery and stimulus: €200bn

The instrument is based on Art 122(1) (not (2) like the EFSM), the basic solidarity clause. @GrundSebastian has written an excellent legal analysis in the piece, that you should read. /3

Important: ours is not a credit line, like the EU's SURE or #ESM support. Neither the grants paid out to countries nor the guarantees to fund the instrument count as countries' public debt. /4

But our proposal does not cover the entire fiscal costs. The part that remains with national governments needs to be funded, cheaply and long-term. So the #ESM as a backstop is still needed. /5

Finally, a big thanks to @JohnSpringford for help, to all those who provided feedback, and to @BaldwinRE for turning this around at record speed. Curious to hear your thoughts. /end