Two Eurobond Proposals

Comparative Analysis of two recent Eurobond Proposals

Amidst renewed debate surrounding the European Union’s strategic imperative to develop a financial ecosystem capable of rivaling that of the United States, this analysis critically examines two seminal proposals for establishing a Eurobond market. The first, authored by Olivier Blanchard and Ángel Uribe in May 2025, advocates for Eurobonds as a cornerstone for enhancing the EU’s fiscal autonomy and market depth. The second, co-authored by Francesco Bianchi, Leonardo Melosi, and Anna Rogantini Picco in July 2023, presents a model-driven framework prioritizing macroeconomic stabilization and policy coordination within the Eurozone.

1. Core objectives
   
   Key overlap: Both agree Eurobonds could reduce borrowing costs and enhance crisis resilience.
2. Structural design
   
   Divergence: PIIE emphasizes market architecture and avoids risk-sharing. Bianchi et al. focus on policy coordination and implicitly accept limited risk-sharing via centralized stabilization.
3. Risk mitigation
   
   Shared concern: Both highlight the risk of market fragmentation but propose distinct solutions.
4. Economic Incentives
   
   Contrast: PIIE emphasizes financial market externalities; Bianchi et al. prioritize macroeconomic stabilization.
5. Political feasibility
   
   Common challenge: Both proposals require overcoming sovereignty concerns, but PIIE’s incremental approach may face fewer hurdles.
6. Critiques and limitations:
   

Synthesis

• PIIE: A market-centric solution targeting financial autonomy, leveraging seniority and scale to compete with U.S. Treasuries. Prioritizes practical implementation within existing frameworks.
• Bianchi et al.: A policy-centric framework addressing macroeconomic instability through coordinated stabilization. Prioritizes crisis resilience via theoretical modeling.

Complementarity: The PIIE proposal could provide the market infrastructure, while Bianchi et al.’s policy framework ensures macroeconomic stability, together potentially forming a holistic Eurobond system.

Policy Implications:

• Short term: Adopt PIIE’s phased Eurobond issuance to build market depth.
• Long term: Integrate Bianchi et al.’s stabilization mechanisms to address ZLB and fiscal dominance risks.

Both works underscore Eurobonds’ potential but caution that success hinges on balancing market design with macroeconomic governance.

Now is the time for Eurobonds: A specific proposal
Authors: Olivier Blanchard, Ángel Ubide
From: Peterson Institute for International Economics, Citadel
Who Is Afraid of Eurobonds?
Authors: Francesco Bianchi, Leonardo Melosi, Anna Rogantini Picco
From: Johns Hopkins University, Federal Reserve Bank of Chicago, Sveriges Riksbank