Bonds Mar 26

EU divided on China's Covid-19 relief bonds

Several states believe that joint bond issues are a high risk of default

EU divided on China's Covid-19 relief bonds
European leaders are split over the idea of joint bond issues as several states fear they are a high risk of default. Photo: Aris Oikonomou / AFP

(ATF) The heads of nine European Union states issued a joint statement calling on other EU member states to follow China’s lead - and issue common bonds to strengthen measures against the Covid-19 epidemic and boost their economies amid the financial crisis, according to Chinanews.com.

The heads of Italy, France, Belgium, Greece, Portugal, Spain, Ireland, Slovenia and Luxembourg issued a joint statement stating the need to recognize the severity of the epidemic and the need to jointly issue bonds to support EU finances and restore economic activity.

But China Economic Net reported that Germany, the Netherlands and Austria were cautious about the idea of jointly issuing bonds with high-debt countries such as Italy, Greece and Portugal. Germany, the Netherlands and other countries believe that joint borrowing with other countries is too risky and the default risk high.

China, on the other hand, has successfully launched Covid-19 relief bonds, nationally, by provinces, by banks and corporations in an ongoing succession of multi-billion-yuan issues in the struggle to suppress Covid-19 and restart the economy. The Covid-19 relief bonds have been marketed as a way to join the “People’s war” against the epidemic, and are highly oversubscribed much like war bonds.

Proceeds have been used to supply everything from medical equipment, to adjusting manufacturing plans and humanitarian relief.