The centrality of public debt to private capital markets
In thinking about the next ten years, we must acknowledge that new times are coming, and they will lead to big changes in the capitalist system. The absolute novelty of the situation in which the COVID-19 crisis has placed the world, and even more markedly, Europe has made the financial and monetary options that have preoccupied economic debate so far, if not obsolete, at least questionable. It is a crisis that obliges us to rethink, before acting, the underlying assumptions of the last thirty years of economics, finance, and politics.
In a bold move, David Sassoli, President of the European Parliament, called for the cancellation of public debt generated to tackle the pandemic. His proposal immediately inflamed debate and pushed

The centrality of public debt to private capital marketsIn thinking about the next ten years, we must acknowledge that new times are coming, and they will lead to big changes in the capitalist system. The absolute novelty of the situation in which the COVID-19 crisis has placed the world, and even more markedly, Europe has made the financial and monetary options that have preoccupied economic debate so far, if not obsolete, at least questionable. It is a crisis that obliges us to rethink, before acting, the underlying assumptions of the last thirty years of economics, finance, and politics.In a bold move, David Sassoli, President of the European Parliament, called for the cancellation of public debt generated to tackle the pandemic. His proposal immediately inflamed debate and pushed

The centrality of public debt to private capital marketsIn thinking about the next ten years, we must acknowledge that new times are coming, and they will lead to big changes in the capitalist system. The absolute novelty of the situation in which the COVID-19 crisis has placed the world, and even more markedly, Europe has made the financial and monetary options that have preoccupied economic debate so far, if not obsolete, at least questionable. It is a crisis that obliges us to rethink, before acting, the underlying assumptions of the last thirty years of economics, finance, and politics.In a bold move, David Sassoli, President of the European Parliament, called for the cancellation of public debt generated to tackle the pandemic. His proposal immediately inflamed debate and pushed

Massimo Amato is Professor of Economics, Bocconi University, Milan. The full paper, whose key points this post seeks to summarise, can be downloaded here in pdf format. ForewordThis post sums up the results of a collective research [1] and aims at providing the fundamental elements of a feasible European Debt Agency (DA). The DA is meant to be charged with financing sovereign debts with advantages both for the Eurozone Member States (MS) and for the system as a whole. The proposal has a structural character, but the DA is designed in such a way as to enable its application even at the present emergency juncture. The problemBefore 2010, interest rates of peripheral MS were lower than their fundamental risk. Since the 2010 crisis, however MS public debts have started to

This is the second of two posts on the current crisis by Professor Massimo Amato, of Bocconi University, Milan. The first, “Lessons to be learnt”, was posted on PRIME on 31st March A new institutional architecture must be thought of. First of all for Europe. Europe has always thought of itself as an experiment and as a process. Now the time has come to experiment with new paths, in view of a new structure after the crisis. In these days, people speak more and more insistently, and not always univocally, of "eurobonds" as means to face the fiscal expansions that the immediate response to the crisis will impose on all states. Just as there was talk of an intervention by the ESM [European Stability Mechanism]. As it is conceived today, the ESM does not uniquely either "save

This is the first of two posts on the current crisis by Professor Massimo Amato, of Bocconi University, Milan. Well before the health emergency is over, the coronavirus crisis has already begun to produce devastating effects on the economy. This happens not only because the only accepted strategy, that of a lockdown, involves a strong slowdown in economic activity, but because the exposure of the economic system to expectations is such that the medium-term effects are so anticipated that they begin to occur already today. Instead of producing antibodies, the current system spreads the instability virus. And so, in addition to addressing the health problem in the proper sense, we also have to protect the economic and financial system before the level of infection is