German government is set on tough austerity measures for indebted states in response to the Eurozone crisis, opponents call for eurobonds. Recently, Germany’s Council of Economic Experts came up with a proposal for solving the euro-crisis, a debt repayment pact. The basis of this pact is the temporary joint financing of member states where public debt exceeds the 60% per cent limit.
In exchange the experts envisage strict consolidation measures and national debt brakes. At the Friedrich-Ebert-Stiftung economists and policymakers intensively discussed the pros and cons of the debt repayment pact. Toralf Pusch, economist at the Institut für Wirtschaftsforschung Halle, laid out the key points of the debate. According to Pusch, «the Pact manages to strike a balance between short-term relief as regards refinancing by crisis-hit states and prudent and long-term budget consolidation.» However, the counterproductive debt brakes and lack of economic stimulus would have to be improved upon.
Could a Debt Repayment Pact Lead Europe Out of the Crisis? / Toralf Pusch – Berlin: Friedrich-Ebert-Stiftung, International Policy Analysis, 2012, http://library.fes.de/pdf-files/id/ipa/09011.pdf