ECON Committee favourable to German experts proposal for a debt redemption fund

MEPs members of the Economic and Monetary Affairs Committee welcomed the proposal put forward by the German Council of economic experts in order to set up a debt redemption fund that would help EU Member states affected by high debts. This proposal is also expected to be on the agenda for the European Council to be held on 9th December.

The German Council of economic experts is an independent body which provides economic advice to the German government and the Bundestag. According to its plan, the debt of Eurozone Member States in excess of 60% of GDP would be hived off into a 2.3 trillion Euro fund which would be redeemed within 25 years. This would allow to lower interest rates on the repayment of this debt allowing more time for it. The aim, as the Council points out, is to tackle short term situations in order to allow a better environment to take solutions for the long term.

The proposal was welcomed by the members of the European Parliament Economic and Monetary Affairs Committee, who saw there a possible solution that could be rapidly implemented and would allow to reduce interest rates for the most affected EU economies. They also considered that it could be a way to support incentives instead of imposing sanctions. However, MEPs were also aware of the fact that some Member states which are currently financing themselves at a low rate would be reluctant to take part in the fund.

About this concern the representative of the Council before the Parliament's Committee, Prof. Christoph Schmidt, highlighted that the debate has now moved from discussing the fairness of interest rates to deciding about the survival of the Euro.