Joint liability in international lending: A proposal for amending the Treaty of Lisbon
Kaushik Basu, Joseph Stiglitz 02 January 2014
The Eurozone crisis exposed weaknesses in the Eurozone’s design. This column – by Nobelist Joe Stiglitz and World Bank Chief Economist Kaushik Basu – argues that the Eurozone’s financial architecture can be improved by amending the Treaty of Lisbon to permit appropriately structured cross-country liability for sovereign debt incurred by EZ members.
The sovereign debt crisis exposed weaknesses in the Eurozone’s financial architecture that may not have been fully anticipated when the founding treaties of the Eurozone were drafted. Key among these weak spots are the provisions of the Treaty of Lisbon which regulate intergovernmental debt obligations and preclude direct financing of sovereigns by the ECB.
EU institutions International finance
eurozone, Maastricht Treaty, sovereign debt, moral hazard, Lisbon Treaty, Eurozone crisis, no-bailout clause
The 30 billion euro deal
Hans-Werner Sinn 22 June 2007
Seigniorage is generated when a central bank creates money and gives it to the private sector in exchange for interest-bearing assets. Under the Maastricht Treaty, the interest earnings are distributed according to country size, but given the dominant role of the DM before the euro, this allocation rule cost Germany about €30 billion.
For Peer Steinbrück and Axel Weber, 2007 is an important year, as the fifth anniversary of the euro in circulation also marks the end of the transition phase to the full socialisation of the Bundesbank’s seigniorage, i.e. its profits from money creation. The times when Germany could achieve special profits from exporting its currency are gone for ever.
Germany, seigniorage, Bundesbank, Maastricht Treaty