15 November 2013

グラハム・ビショップ：TEF（暫定ユーロ共同債ファンド）案の概要と実施時期について

Graham Bishop is a member of the European Commission’s Expert Group (press release) studying the joint issuance of debt in the form of a redemption fund and Eurobills. Graham has worked for more than two years to develop a plan for a Temporary Eurobill Fund (TEF)[1]. The Expert Group's wide-ranging Mandate is here.

Summary of the Proposal

The Temporary Eurobill Fund is carefully structured to avoid opening its members to the virtually unlimited liability of guaranteeing all the debts of other members – as would happen in a mutualised pool of debt with 'joint & several' guarantees. The guarantees would be 'pro rata' – as with the existing ECB/ESM structures.  It is not a 'silver bullet’ solution but a relatively modest, though reversible, step towards deepening trust and solidarity amongst euro area states.

The over-arching objectives of the TEF are to restore confidence within the euro area economy by promoting the return of the `Single Market’ in banking and finance. Nonetheless, it recognises the political reality: further integration must be in the form of modest, incremental and reversible steps that are easily demonstrated to benefit citizens.

The financial objectives include:  (i) Eliminate risk of a euro government liquidity crisis (by eliminating `roll-over’ risk for euro area government bonds):  (ii) Create the safest, most liquid euro area financial asset for banks, business and citizens – enhancing the `single market’ in finance:  (iii) Reduce the `doom loop’ between banks/states to improve monetary policy transmission and thus ease the effective monetary tightness for SMEs/citizens in several states:  (iv) Reduce the burden on the ECB - ending the need for OMT and ELS.   Finally (v) it would give a small reduction in the interest burden for some states.

More general political objectives include: Deepening trust between euro area states as the TEF gives an incentive to comply with CSR/SGP requirements and permits observations of CSR compliance over an economic cycle before any decision is needed on renewing the Fund. It provides further assistance to states exiting a Programme and it minimises `moral hazard’. The TEF provides the possibility of a modest `fiscal capacity’ and creates the basis for a European Treasury. Ahead of the European Parliament elections next May, a decision to enact the TEF would demonstrate that `Europe’ still has the political ability and will to take significant economic decisions.  Such a decision would be a further, small step along the road to integration – while remaining reversible at any time.  Immediate reversibility is the key to minimising moral hazard.

Basic Features of the TEF:

• “International financial institution” (based on the ESM Treaty so corresponding guarantees)
• “Pass thru” market finance to participating states so cash in/out matched - for absolute simplicity and transparency
• Only states that are in `good standing’ with Eurogroup can borrow (Utilise existing EU-28 `strict conditionality’ processes of EDP and European Semester, etc.)
• Temporary – for five years (Member States could extend/make permanent if successful BUT issuance could be halted at any time, and liability run off in two years maximum – minimising moral hazard)
• Range of bills from overnight to two year maturity – reflecting borrower demand, but subject to limits on shortening maturity profile so [around 70%] of debt remains fully subject to market discipline
• Bills to be sold to individuals, businesses and financial institutions
• All participating states MUST raise all sub-two-year funds via TEF
• Size: likely €1-1.5 trillion; likely maximum under crisis circumstances: €2.5 trillion
• Capital: modest operating capital as ESM programme would pay off any defaulters. So `normal’ borrowing limit of any large state must be less than the ESM’s lending capacity.
• Total exposure of a state to `Europe’ would be no greater than currently.
• Exclusion from TEF: Automatic upon imposition of sanctions under SGP, but add new article to SGP to provide that sanctions for TEF members be taken by Heads of State/Govt.
• No change to TFEU required and the TEF could operate within a year via an inter-governmental Treaty

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 [1] Click here for detailed TEF paper, as at Feb 2013

© Graham Bishop