Capital Markets: Challenges and Developments

Euro Zone ‘Coronabonds’

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Coronabonds, Eurozone

Mains level : Not Much

The coronavirus pandemic has revived the acrimonious debate between euro zone countries about jointly issuing debt through instruments called Coronabonds.

Coronabonds

  • Coronabonds are proposed debt instruments amongst EU member states, with the aim of providing financial relief to Eurozone countries battered by the coronavirus.
  • They aim to meet healthcare needs and address the deep economic downturn that is set to follow.
  • The funds would be mutualised and supplied by the European Investment Bank, with the debt taken collectively by all member states of the European Union.
  • The euro zone jointly issues debt through its bailout fund, the European Stability Mechanism, which borrows on the market against the security of its paid-in and callable capital provided by euro zone governments.

Back2Basics

What is Eurozone?

  • The Eurozone officially called the euro area is a monetary union of 19 of the 27 European Union (EU) member states which have adopted the euro as their common currency and sole legal tender.
  • The monetary authority of the Eurozone is the Eurosystem.
  • It consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
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