COLUMNISTS The rise in European bond spreads has triggered a discussion among finance ministers about the wisdom of a joint issuance of a single European bond. It is a bad pretext for a good idea. It is difficult to see how a common bond issuance would solve the acute problem of a hypothetical payment default of a member state of the eurozone. But it is a good idea nevertheless. A common eurozone market for government debt would be a powerful rival to the US Treasury market and it could bring substantial financial and economic benefits.
The idea was predictably knocked down by the German finance minister, who quickly calculated that a joint European bond would cost Germany extra annual funding costs of €3bn ($3.9bn, £2.8bn) a year. I do not know how he arrived at the figure because the actual cost depends greatly on how such a common bond would be constructed. In any case, if Germany was a loser, there would be a simple solution to the problem: let every loser be compensated by the winners. The financial and potentially economic benefits would be larger than the compensation.
