Joint liability bonds for a joint European defense against the pandemic

The problem. Mitigating the impact of the Covid-19 pandemic will require a significant increase in public spending to rescue sinking economies and further shield health systems. At the same time, tax revenues will be collapsing as long as economic activity remains suppressed. Budget deficits will inevitably swell, leading to soaring public debt. Eurozone countries - such as Italy, Greece, Portugal and Spain - that have already suffered the effects of the sovereign debt crisis - and their debt remains high - will be hit particularly hard. 

The increase in debt will call into question its sustainability, posing the risk of a fresh debt crisis. Such a scenario would be most unwelcome as these countries have struggled to put their public finances on a sound footing. Greece, for example, reduced its fiscal deficit by an unprecedented 14 percent of gross domestic...