By now, what is increasingly evident, and which European Union policy will probably soon have to deal with, is the need to implement Eurobonds. The other solutions all seem insufficient if the will is to keep the monetary union intact. The division into tranches of public debts proposed by F.Marchionne it is a brilliant idea that must come before the introduction of the Eurobond as outlined in the article published on FIRSTonline on August 23rd: the various tranches, up to the "equity" one ("red debt"), perhaps characterized by a very long duration and high minimum denomination (above 250.000 Euros, for example, to address only "qualified" operators), makes it possible to target the different risk-return profiles of institutional investors. The green tranches, to be included with the different proportions assigned to the various countries, could also be collateralized (with possible privatizations or cash flows - think of the potential collections in the management of historical-artistic heritage), so as to increase their attractiveness and rating .
From this point of view, even "red debt", if issued with longer maturities than the rest of the country's debt, could be used to finance government investment expenditure, collateralized by cash flows (e.g.: expenditure for restructuring highways, with coupons on the debt covered by any toll revenue), so that public spending, even in an "austerity" phase, maintains the focus on growth, the only real way out to reduce the public debt/GDP ratio.
Read also:
Fratianni: F.Marchionne's idea on flexible Eurobonds is right, even Berlin will be convinced
(by Michele Fratianni)
Eurobonds are the way to relaunch Europe: just divide the debt by degree of risk
(by Alberto Niccoli)
Ferri: don't give up on Eurobonds. F. Marchionne's proposal is problematic but interesting
(by Giovanni Ferri)
