Transforming Sovereign Debts into Perpetuities through a European Debt Agency

32 Pages Posted: 24 Apr 2020

See all articles by Massimo Amato

Massimo Amato

Bocconi University - Department of Policy Analysis and Public Management

Everardo Belloni

Politecnico di Milano-Dipartimento Ingegneria Gestionale

Paolo Falbo

University of Brescia - Department of Economics and Management

Lucio Gobbi

University of Trento - Department of Economics and Management

Date Written: April 18, 2020

Abstract

This paper outlines the main operating framework of a Debt Agency (DA) for the management of the Eurozone sovereign debts. The framework leverages on the potential irredeemable nature of sovereign debts in order to build a common bond. Structurally filtering liquidity risk, the DA can price the Member States' installments by referring only to their fundamental risk. The common bond issued by the DA then avoids mutualisation by design, hence it can be directly bought by the ECB. Thanks to its structural intertemporal sustainability, the DA framework sketched here can serve as a benchmark for institutional and political decisions.

Keywords: Safe Asset, Debt Agency, Eurozone

JEL Classification: E42, E44, E62

Suggested Citation

Amato, Massimo and Belloni, Everardo and Falbo, Paolo and Gobbi, Lucio, Transforming Sovereign Debts into Perpetuities through a European Debt Agency (April 18, 2020). Available at SSRN: https://ssrn.com/abstract=3579496 or http://dx.doi.org/10.2139/ssrn.3579496

Massimo Amato (Contact Author)

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

Everardo Belloni

Politecnico di Milano-Dipartimento Ingegneria Gestionale

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

Paolo Falbo

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Lucio Gobbi

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

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