Webinar part of D-DebtCon discussed the “Sovereign Debt in the European Union”
On 8th September 2020, the European University Institute hosted the three-hour webinar “Sovereign Debt in the European Union” part of the Distributed DebtCon (or D-DebtCon).
D-DebtCon features ten institutions from around the world holding academic paper and policy discussions focusing on different aspects of sovereign debt over two weeks between September 7 and September 18.
The webinar “Sovereign debt in the European Union” started with three very insightful presentations:
the research papers presented addressed 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.
Flavia Corneli (Senior Economist, Bank of Italy) highlighted that “financial frictions constrain the choice of a country on the maturity structure of its debt.” Giancarlo Corsetti (Professor of Economics, University of Cambridge) warned in his policy recommendations that “the threat of belief-driven crisis is not enough to motivate risk reduction policies.” Luis Rojas (in a paper co-authored with Dominik Thaler) provided an optimistic perspective about the risk of the ‘vicious circle’ between banks and their sovereigns.
Following the research presentations, Rolf Strauch (Chief Economist, European Stability Mechanism) delivered his Keynote Speech “A Fresh Look at Debt Sustainability in the Euro Area”. Rolf Strauch highlighted the need to realise the critical role of the EU Recovery Fund and of the Recovery Programmes that countries will design and implement to support it, to reconsider our models and computations and acknowledge uncertainty and limitations / different time horizons. Finally to pay more attention to flows rather than stocks and quality of debt.
The policy panel explored the future challenges of sovereign debt in the EU, by focusing on debt sustainability at the national level, common EU borrowing and safe assets. Isabelle Mateos Y Lago (Managing Director and Deputy Head of BlackRock’s Official Institutions Group) mentioned the three pillars for the European recovery: first, keep the real interest low, second, take care of growth and third, keep integrating. Agnès Bénassy-Quéré (Professor of Economics, Paris School of Economics and Chief Economist, French Treasury) flagged that France is one of the main issuers of green bonds, immediately after the EIB. Pablo de Ramón-Laca Clausen (Spanish General Director of the Tesoro and Financial Policy) compared the current circumstances with the global financial crisis years, arguing that this time the Euro market is very liquid. Marco Buti (Head of Cabinet of EC Commissioner Paolo Gentiloni) concluded in his intervention that debt sustainability should not be put under the carpet, because issues are not solved yet.
In his concluding remarks, Jean Pisani-Ferry (Tommaso Padoa Schioppa Chair at the European University Institute and Professor of Economics at Sciences Po) asked whether the new framework should put more emphasis on growth as opposed to what has been done so far.
You can find more information about this and the other webinars from D-DebtCon here