15 European economic governance in times of crisis: Solidarity, responsibility, and legitimacy in EU debt mutualisation

Abstract

Common EU debt instruments (also known as Eurobonds or, more recently, Coronabonds), have often been portrayed as a panacea in EU economic governance. A plethora of proposals emerged in academic and policy circles, especially in times of political and economic crisis. Limited instances of debt mutualisation have existed in Europe at least since the 1970s oil shocks. During the Eurozone crisis, academics and policymakers went as far as to call for the establishment of treasury-like mechanisms mutualising existing national debt and issuing new joint debt securities. Yet, leaders instead mainly implemented loans-based solutions, such as the European Stability Mechanism. Conversely, in 2020, amid the Covid-19 crisis, the EU managed to create an ambitious common debt programme in the context of its Recovery Plan “Next Generation EU”. What changed between these crises? What factors played a role in making some proposals a reality and others unfeasible? To shed some light on these questions, this chapter presents and analyses proposals and instances of EU debt mutualisation during the Eurozone and the Covid-19 crises. By considering their solidarity and responsibility features, it induces a conceptual framework to better understand their legitimacy, and ultimately their political and economic feasibility. It concludes by suggesting how this same conceptual framework may shed light on other domains of EU crisis response.