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Sovereign Debt in the European Union

September 8, 2020 @ 3:00 pm – 6:00 pm Europe/Rome Timezone

Sovereign Debt in the European Union

Tuesday, 8 September 2020, 15.00-18.00 CEST

Webinar part of Distributed Interdisciplinary Sovereign Debt Research and Management Conference — D-DebtCon

Organised by:

The COVID-19 pandemic is causing havoc in an already fragile global economy. While its full impact in terms of capital flows and debt levels is yet unknown, unprecedented government interventions to minimize the economic impact have spiked public debt to levels unseen in the last 50 years. According to the IMF projections1 for 2020 public debt relative to GDP will increase by over 13% in the Euro Area and worldwide.

At the same time, new trends are emerging in sovereign debt markets. A number of European sovereigns have announced plans to issue green bonds in 2020, as well as other new debt instruments such as social bonds, sustainability bonds and sustainability-linked bonds. New market developments, in particular after the COVID-19 outbreak, have included floating-rate notes and index-linked bonds.

During the euro area crisis of a decade ago the EU sovereign debt markets suffered damage as never before, while the policy response involved the creation of new instruments and institutions. Today, as a response to the huge shock caused by the COVID-19 outbreak, EU leaders have agreed on a historic package for European recovery, ‘Next Generation EU’. Within this recovery package, the European Commission was mandated to raise €750bn of funds on the markets during the next two years.

Against this background, the research papers to be presented will address a number of facets of EU sovereign debt markets: their maturity structure and cost, the pace of debt crises, and the characteristics of the bank-sovereigns doom-loop. The policy panel to follow will explore the future challenges of sovereign debt in the EU, by focusing on debt sustainability at the national level, common EU borrowing and safe assets.

1IMF Fiscal Monitor, April 2020 regarding General Government Gross Debt in percent of GDP, available at https://www.imf.org/en/Publications/FM/Issues/2020/04/06/fiscal-monitor-april-2020

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