Prelims Level
Mains Level
Prelims Syllabus : Banking Mains Syllabus : GS-III Effects of liberalization on the economy, changes in industrial policy and their effects on Industrial Growth

Context:

  • Corona bonds is recently seen in news, which could be a possible resolution to alleviate Eurozone financial struggles amid the coronavirus crisis.

About Corona Bonds:

  • It would be a collective debt amongst EU member states, with the aim of providing financial relief to Eurozone countries battered by the coronavirus.
  • It would also be mutualised and supplied by the European Investment Bank, with the debt taken collectively by all member states of the European Union.
  • The idea of corona bonds has received reinforcement from nine EU countries, all keen to reach a financial solution as soon as possible. Not all countries in the European Union (EU) are in favour of this idea.
  • The resistance has come most notably from the ‘Frugal Four’. The Frugal Four consists of Germany, The Netherlands, Finland, Austria
  • These countries are of the opinion that finance is an individual nation’s responsibility. They believe that each EU member state should keep their finances in order.

Significance:

  • It would allow European countries to gain essential financial support.
  • Their States could receive economic aid without expanding their national debt.
  • If all the EU member states support this idea, then this would likely strengthen confidence amongst Europe.

Way Forward:

  • Its disadvantage is that it would not necessarily enhance debt sustainability.
  • Its concept would only aid future debt forgiveness, distinguishing between coronavirus related debt and legacy debt.
  • The implementation of a common bond amongst EU member states could also potentially take a lot of time. The delay is not ideal for countries who require access to funds immediately.
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