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Several euro-zone countries are now making loud calls for the issuance of eurobonds (coronabonds) to finance the massive fiscal deficits in the euro zone in response to the coronavirus crisis, analysts at Natixis report.

Key quotes

“Issuing coronabonds in 2020 would be politically significant, as a demonstration of European solidarity. But it would be of little use economically or financially, as the ECB is going to monetise all the additional fiscal deficits resulting from the coronavirus crisis.”

“Once the health crisis is over, there will be new public spending needs (support for investment, the healthcare sector and the onshoring of strategic industries). These additional structural fiscal deficits will be difficult to finance, because they will not be monetised by the ECB.”

“There is more of a need for ‘post-corona’ bonds, to finance these large public spending needs after the crisis, than for coronabonds to finance the immediate crisis response.”