WASHINGTON, April 16 (Reuters) - Spanish Finance Minister Carlos Cuerpo called on Thursday for more joint EU debt issuance, arguing the lower cost of borrowing that would follow would save taxpayers'
Spain Urges Joint EU Debt Issuance to Reduce Costs and Boost Investment
Spanish Finance Minister Advocates for Joint EU Debt
Call for Increased Joint Debt Issuance
WASHINGTON, April 16 (Reuters) - Spanish Finance Minister Carlos Cuerpo called on Thursday for more joint EU debt issuance, arguing the lower cost of borrowing that would follow would save taxpayers' money and help finance the much-needed investment.
EU's Readiness for Joint Debt
Speaking at the Peterson Institute for International Economics in Washington, Cuerpo said the European Union already had almost all the ingredients necessary to issue joint debt - a safe asset - because it was a key player in international trade, had strong institutions and a resilient market infrastructure.
Proposed Structure for Joint Debt
"The European Commission could issue on behalf of EU member states a specific share, a certain amount. For example, we could be thinking of about one-third of yearly redemptions and also the specific deficit that is allowed by European fiscal goals," Cuerpo said on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.
Potential Market Impact and Savings
"If we just look at these two elements, that would mean, in five years time, (we) would have a 5 trillion euro-denominated market issued by the European Commission, which would imply 25 billion euros in savings on an annual basis," Cuerpo said.
Opposition and Compensation Mechanisms
Resistance from Northern European Countries
Germany and some other northern European countries have been strongly opposed to joint EU debt, not willing to share the responsibility for the debts of others.
Compensation for AAA-Rated Countries
The savings would come from the fact that the Commission's borrowing is cheaper, because its debt is AAA-rated. Cuerpo said under the Spanish proposal, there would be some compensation mechanism for EU countries that already have AAA (ratings) and can borrow equally cheaply or cheaper - Germany, Denmark, Luxembourg, Netherlands, and Sweden.
Comparison with U.S. Treasury and Future Outlook
Current and Projected Debt Issuance
He said joint debt issuance by the Commission now was 750 billion euros, while U.S. Treasury issuance was $40 trillion, but the 5 trillion euros of EU safe assets in five years would be a good start.
Need for a Safe Asset
"This is a step that we need to take. We need an anchor, we need a safe asset," he said.
(Reporting by Jan Strupczewski; Editing by Paul Simao)
