Corona Bonds In EU

Corona Bonds are joint debt securities issued by the EU institution in lieu of individual EU

Member States are issuing debt securities and materialized debt, taken collectively by all Members

States of the European Union with the proceeds of the debt shared among all Member States in pre-agreed proportions. Initially intended to pay off the expenses of the Coronavirus

emergency, they rely on the four key components of the Social Bond Principles ("SBP") of

the International Capital Market Association:

● utilization of bond proceeds for projects with social benefits;

● process for project evaluation and selection;management and tracking of the use of proceeds;

● reporting on the use of proceeds

With the Coronavirus Pandemic at its worst and the world still recovering from financial

crisis of 2008, EU faces a deeper recession than originally thought. Of the 27 countries that

comprise the EU, a downturn of 8.3% is expected in 2020, before growing by 5.8% in 2021.

And governments now have to dig deep to address the challenges of

-public health and high morbidity rates

-multiple economic implications

Fiscally prudent countries (Germany, Austria,Netherlands) did not like the idea of less prudent countries (Italy, France and Spain)"borrowing" their reputations in order to

raise cheap money in the bond markets. EU chancellor Angela Merkel said,"Without the constraint of higher borrowing costs less prudent countries will never change their ways, and they should not benefit from the hard work, prudence and financial-stability of their neighbor”.

Later, they proposed creating a Pandemic Crisis Support instrument within the European Stability Mechanism (ESM) and the Eurozone-bailout fund, to fund the hardest hit countries and to leave no doubt that Europeans are in this together.

But in the Eurozone, there was still political tussle over its working although European

The investment bank issued €3 Billion bonds. The flurry of new bonds, raising funds to tackle the Covid-19 pandemic are examples of innovative debt products that are outside the scope of the EU's proposed Green Bond Standard (EU GBS), noted ISS ESG, a specialist ratings and advisory firm.

A positive future development with the Corona Bonds would be the approval of the EU-

Prospectus and the format of the application alongside, making it simpler in the hope that this might foster bond offerings in the wake of COVID-19 .

According to the research done by multiple economists and financial experts, losses upto

€1.10 trillion, which is 25% of corporate loans and 43% of bank capital, can be stabilized if

The bonds are allowed visibility up to an extent to which the Commonwealth government will

remain prudent in other spending and would use a precedent already established in making a graver distinction between spending for investment and spending for consumption.

So we conclude by saying these measures do not rest on either solidarity or transfers. What is urgently needed instead is a certain dose of pragmatism. The dogma must be given up and start working towards the long-term survival, viability, and sustainability of the EMU beyond Covid-19,

Thank you, hope you enjoyed reading the article.

This was written with Abhisek Lal in FIC HAnsraj Fellowship Program really enjoyed writing it, had a great experience and learnt a lot from the program.