The Pros and Cons of the Eurobond
Political debate aside, eurobonds are plagued with so many administrative hurdles, they may never see the light of day. Article 125 of the Lisbon Treaty -- the infamous no-bailout clause -- states the EU or any member state "shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any member state." Eurobonds thus require a treaty amendment -- a Herculean task, considering all 27 heads of state must sign off and all national parliaments need to ratify it. Negotiations on language all parties find acceptable, including potential opt-outs, could take years.
In Fisher Investments' view, the deregulation, tax relief and labor market liberalization Merkel's pushing likely provide the best long-term path for Europe. As ever, though, there's likely no quick fix for the region.
Even if the union can pull off eurobonds in the far future, as a potential near-term fix for the eurozone they're no more a silver bullet than any of the other grand plans touted in the past two-plus years. But the political will to preserve the euro remains steadfast, and officials likely continue their step-by-step approach to keeping the currency union intact.
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