ECB’s Mersch: Recovery Fund Doesn’t Mean Joint Debt Should Be Norm

8 October 2020

By David Barwick – FRANKFURT (EconoStream) – European Central Bank Executive Board member Yves Mersch on Thursday argued against joint EU debt issuance becoming the norm.

In a virtual speech for the conference “The Werner Report, 50 Years on”, Mersch, according to a text made available by the ECB, said that the Next Generation EU recovery fund agreed on by European leaders in July actually signalled that fiscal policy remained the realm of national governments.

Observing that the €750 billion recovery fund was the first time the EU had agreed to assume debt jointly, Mersch said this apparent precedent ‘does not mean that outside of crisis times and the 2021-27 multiannual financial framework, common debt issuance should become the norm.’

The debt to be issued for the recovery fund is intended to be temporary, he said, an ‘ad hoc fiscal reinsurance’ that in fact ‘signals that fiscal policy remains largely national and subject to control by national parliaments’.

Although ‘some Europeanisation of fiscal policy’ is part of a currency union, and has now understandably ‘reached its peak in common debt issuance’ to respond to the crisis, such measures ‘should not be taken beyond crisis times without parallel deepening of the institutional functioning of democracy at the Union level’, he said.