On 23 November 2011, the European Commission published a Green Paper on Stability Bonds which set out three main options: the full substitution by Stability Bond issuance of national issuance, with joint and several guarantees; the partial substitution by Stability Bond issuance of national issuance, with joint and several guarantees; and the partial substitution by Stability Bond issuance of national issuance, with several but not joint guarantees. The objective of the Green Paper is to have a broad debate on the issues raised. The paper sets out the likely effects of each of these approaches on Member States' funding costs, European financial integration, financial market stability and the global attractiveness of EU financial markets. It also considers the risks of moral hazard posed by each approach, as well as its implications with regard to Treaty change. Stability Bonds are seen by some as a potentially highly effective long-term response to the sovereign debt crisis; however there are those that are concerned that Stability Bonds would remove the market incentive for fiscal discipline and encourage moral hazard. The Commission has emphasised the fact that any move towards introducing Stability Bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline. The extent of this strengthening needs to correspond to the ambition of the approach chosen.
Following ECOFIN on 30 November 2011 the European Commission said it would carry out further analysis on this issue and revert in due course to Council. This is very much the start of a process. Some of the options identified in the Green Paper would require Treaty changes.
This is a very complex issue that requires ongoing in-depth analysis of all the implications. Ireland will play a full and constructive part in this process.