Who is Afraid of Eurobonds?

Francesco Bianchi, Qingyuan Fang, Leonardo Melosi and Anna Rogantini Picco

No 35510, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The current euro area policy framework conflates short-run stabilization with long-run fiscal sustainability, exposing members to deflationary and inflationary tail risks. We employ an estimated euro area model to analyze an alternative framework that separates these objectives. A centralized Treasury issues Eurobonds to finance countercyclical stabilization, while national governments retain responsibility for long-term fiscal sustainability. The Treasury can coordinate with the monetary authority in case of a large recession, with no need to suspend fiscal rules at the national level. The arrangement functions as an automatic stabilizer, eliminating the tail risks of deflation and fiscal stagflation.

JEL-codes: E30 E50 E62 (search for similar items in EconPapers)
Date: 2026-07
Note: EFG IFM ME
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Related works:
Working Paper: Who is Afraid of Eurobonds? (2023)
Working Paper: Who is Afraid of Eurobonds? (2022)
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