The ECB enjoys the power of monetising public debts—a privilege most eurozone members would not enjoy if they kept their pre-euro national currencies. The PEPP is a step in the right direction, granting fiscal space to the governments of the euro area. [...]
First, as with the ECB, the finance ministers grouped in Ecofin could decide to enforce the SGP after 2020 and thus force countries on to an austerity path of adjustments once again. Secondly, increasing fiscal deficits means increasing bond spreads between eurozone countries. The temporary character (and limited scope) of the PEPP does not guarantee public debts in the long term and it opens the door to solvency problems, as in the 2010-12 crisis, for most eurozone members. What we need is a financing mechanism which guarantees no austerity in the future. [...]
Two institutions are already in place. The European Stability Mechanism (ESM) has announced that it has at its disposal €410 billion (3.4 per cent of eurozone GDP), to be lent to euro-area members in amounts up to 2 per cent of their GDP. To finance the rescue packages of Greece or Spain, the ESM has already been issuing de facto eurobonds, guaranteed by all eurozone members, to the extent of their share in the ESM capital. The problem is that countries gaining access to the ESM funds would do so through the Precautionary Conditioned Credit Line, conditioned by a memorandum of understanding (MoU).
