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European Safe Bond: Handle With Care

 “European Safe Bond: Handle With Care”, Social Europe, 5 Ιουλίου

In the Euro Area there is a scarcity of risk-free securities; these are issued today only by a few sovereigns with a very high rating, but not by any European institution given strong German opposition. This situation creates huge capital flows in stress periods (flight-to-quality) and it contributes to the diabolic loop between bank and sovereign risks. Hence the recent proposalby Marcus Brunnermeier and other economists to create Sovereign Bond-Backed Securities (“ESbies”) or European Safe Bonds. The proposal has recently been endorsed by the EU Commission.

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