Eurobond (eurozone)

Eurobonds or stability bonds were proposed government bonds to be issued in euros jointly by the European Union's 19 eurozone states. The idea was first raised by the Barroso European Commission in 2011 during the 2009–2012 European sovereign debt crisis. Eurobonds would be debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to the eurozone bloc altogether, which then forwards the money to individual governments. The proposal was floated again in 2020 as a potential response to the impacts of the COVID-19 pandemic in Europe, leading such debt issue to be dubbed "corona bonds".

Eurobonds have been suggested as a way to tackle the 2009–2012 European debt crisis as the indebted states could borrow new funds at better conditions as they are supported by the rating of the non-crisis states. Because Eurobonds would allow already highly indebted states access to cheaper credit thanks to the strength of other eurozone economies, they are controversial, and may suffer from the free rider problem. The proposal was generally favoured by indebted governments such as Portugal, Greece, and Ireland, but encountered strong opposition, notably from Germany, the eurozone's strongest economy. The plan ultimately never moved forward in face of German and Dutch opposition; the crisis was ultimately resolved by the ECB's declaration in 2012 that it would do "whatever it takes" to stabilise the currency, rendering the Eurobond proposal moot.

Blue bond proposal

In May 2010 the two economists Jakob von Weizsäcker and Jacques Delpla published an article proposing a mix of traditional national bonds (red bonds) and jointly issued eurobonds (blue bonds) to prevent debt crises in weaker countries, while at the same time enforcing fiscal sustainability. According to the proposal EU member states should pool up to 60 per cent of gross domestic product (GDP) of their national debt under joint and several liability as senior sovereign debt (blue tranche), thereby reducing the borrowing cost for that part of the debt.