如何解决欧元危机

A comprehensive solution of the euro crisis must have three major components: reform and recapitalization of the banking system, a eurobond regime, and an exit mechanism.

First, the banking system. The European Union’s Maastricht Treaty was designed to deal only with imbalances in the public sector; but, as it happened, the excesses in the banking sector were far worse. The euro’s introduction led to housing booms in countries like Spain and Ireland. Eurozone banks became among the world’s most over-leveraged – and the worst-affected by the crash of 2008. They remain badly in need of protection from the threat of insolvency.

The first step was taken recently when the European Financial Stability Facility was authorized to rescue banks as well as governments. This needs to be followed by other steps. The equity capital of banks urgently needs to be substantially increased. And if a European agency is to guarantee banks’ solvency, that agency must also oversee them.

A European banking agency would break up the incestuous relationship between banks and regulators that was at the root of the excesses that fueled the current crisis. And it would interfere much less with national sovereignty than would the subordination of fiscal policies to an EU or eurozone-wide authority.

Second, Europe needs eurobonds. The introduction of the euro was supposed to reinforce convergence; in fact, it created divergences, with widely different levels of indebtedness and competitiveness separating the member countries. If heavily indebted countries have to pay heavy risk premiums, their debt becomes unsustainable. And that is now happening.

The solution is obvious: deficit countries must be allowed to refinance the bulk of their debt on the same terms as surplus countries. This is best accomplished by authorizing the issuance of eurobonds, which would be jointly guaranteed by all of the member countries.

While the principle is clear, the details will require a lot of work. Which supranational agency will be in charge of issuing eurobonds? What rules will it follow in authorizing issuance? How will it enforce the rules?

Presumably, the eurobonds would be under the control of the eurozone finance ministers. The board would constitute the fiscal counterpart of the European Central Bank; it would also be the European counterpart of the International Monetary Fund.

The debate will therefore revolve around voting rights. The ECB operates on the principle of one vote per country; the IMF assigns voting rights according to countries’ capital contributions. Which system should prevail? The former could give carte blanche to debtor countries to run up their deficits; the latter might perpetuate a two-speed Europe. Some compromise will be necessary.

Because the fate of Europe depends on Germany, and because the issuance of eurobonds will put Germany’s own credit standing at risk, the compromise will clearly have to put Germany in the driver’s seat. Unfortunately, Germany has some unsound ideas about macroeconomic policy: it wants the rest of Europe to follow its example. But what works for Germany cannot work for the rest of Europe: no country can run a chronic trade surplus without others running deficits. Germany must propose rules that other countries can follow.

These rules must allow for a gradual reduction in indebtedness. They must also allow countries with high unemployment, like Spain, to continue running budget deficits. Rules involving targets for cyclically adjusted deficits can accomplish both of these goals. Most importantly, the rules must recognize their own imperfection – and thus must remain open to review and improvement.

Bruegel, the Brussels-based think tank, has proposed that eurobonds should constitute 60% of eurozone members’ outstanding external debt. Given the high risk premiums currently prevailing in Europe, this percentage is too low to constitute a level playing field. In my view, new issues should be entirely in eurobonds up to a limit set by the Board. The higher the volume of eurobonds a country seeks to issue, the more severe the conditions the Board would impose. The Board should have no problem imposing its will, because denying the right to issue additional eurobonds would be a powerful deterrent. Surveillance must be improved, however, in order to give countries timely notice when they are in violation.

This leads directly to the third unsolved problem: What happens if a country is unwilling or unable to keep within agreed conditions? Inability to issue eurobonds could result in a disorderly default or devaluation. In the absence of an exit mechanism, this would have catastrophic consequences. A deterrent that is too dangerous to invoke would lack credibility. Greece constitutes a cautionary example.

This is the most difficult of the three problem areas, and I do not claim to have a ready solution. Much depends on how the Greek crisis plays out. It might be possible to devise an orderly exit for a small country like Greece that could not be applied to a large one like Italy. In that case, the eurobond regime would have to carry sanctions from which there is no escape – something like a European finance ministry that has political as well as financial legitimacy which could emerge from the intense debate and soul-searching that is so badly needed (particularly in Germany).

One thing is certain: these three problem areas – reform and recapitalization of the banking system, a eurobond regime, and an exit mechanism – need to be resolved to make the euro a viable currency. But financial markets might not offer the respite necessary to put the new arrangements in place.

Under continued market pressure, the European Council might have to find a stopgap arrangement to avoid a calamity. It could authorize the ECB to lend directly to governments that cannot borrow from the markets on reasonable terms until a eurobond regime is introduced.