It is a fact that, the Eurozone lacks a mechanism to solve such the sovereign debt crisis, especially because it was not considered possible that a Eurozone country could come to the brink of sovereign default. The most comprehensive solution to the European current sovereign debt crisis would be a full fiscal union for the Eurozone, in which a key authority controls spending, most necessary debts and taxes.
Eurobonds could help for sure to calm the market panic and ease the immediate budgetary crisis of some countries, including Italy and Spain. But unfortunately, a Eurobond as a single solution is not able to reduce overall levels of debt, let alone tackle the underlying structural problem that countries such as Greece are simply unable to compete fairly with their Eurozone partners. The best solution about debt crisis refers to the creation of a Eurobond system which avoids the free riding problem and at the same time giving weak member states the incentives to adopt much needed financial reforms. Definitely, Eurobonds could be a fundamental part of the suitable solution that would be helpful for Europe to overcome the debt crisis, only if designed in the right form to take into account fiscal fundamentals, for short run and long run.
Eurobond is one of the prominent proposed solutions to the European financial crisis and is issued by multinational corporations, large domestic corporations, governmental enterprises, sovereign governments and international institutions. Also, they are offered at the same time in a number of different national capital markets, but neither in the capital market of the country, nor to residents of the country, in whose currency the bond is denominated. These bonds would be emitted by a European agency on behalf of all the member countries of Eurozone.
In essence, the aim of a Euro bond is appeared to be important because in-debt countries can share their debt with other countries; allow the euro zone to not only “share a common currency, but a common debt load.” Regarding Europe crisis, Eurobond has been mooted as a part of the solution to the Eurozone debt crisis, as it would prevent markets from differentiating between the creditworthiness of different government borrowers.
Eurobonds can be considered a very good part of the solution of European debt crisis, under the condition of overcoming the present issues and only if the countries who are against them are persuaded to change their minds. It is well-known that Germany is completely against Eurobonds, but even if the Germans finally signed up in favour of Eurobonds, Eurobonds unfortunately would not resolve the crisis at all. Eurobonds would be a prominent proposed solution to guarantee that no Eurozone member country would ever risk a default. Since these bonds would be guaranteed by all members’ countries, no single country could be attacked by investors.
Certainly, it is cut clear that Eurobonds are not enough in order to solve every level of the debt but they could bring the most suitable solution in combination with alternative methods and mechanisms of bailouts. They can only be profitable with a well-built underlying economic governance structure that has to be independent, credible and efficient in setting sanctions. Finally, in the event of unsuccessful usage of Eurobonds on the present European crisis, therefore they would be surely very helpful for all possible newly emitted sovereign debt of the member countries of eurozone.