The Modest Proposal fully adopted by Europe’s Trades Union Council. And backed, in part, by Jean Claude Juncker in the FT

In the past few days, our Modest Proposal for the resolution of the euro crisis seems to have made headway on two separate, quite disparate, fronts.

On Wednesday 2nd December, the European Trades Unions Council (the confederation of Europe’s trades unions) endorsed it fully and unequivocally in its Agenda Item 5c which came under the title: A New European Debt and Investment Initiative (Click: ETUC endorses our Modest Proposal and here ETUC letter to EU Ministers of Finance)  First, the ETUC endorsed our basic tenet proposing “a  ‘tranche transfer’ of national debt of up to 60 per cent of GDP to the ECB”. Adopting our argument in its entirety, the ETUC emphasises that this “would not be a debt write-off. The member states whose bonds are transferred to the ECB would be responsible for paying the interest on them, but at much lower rates.” Moreover, the same document borrows our second main recommendation, namely the need “[t]o support an investment led recovery funded by the European Investment Bank and national public credit institutions both through their own financing and by drawing on Eurobonds, thereby fulfilling the commitment of member states and the European Parliament to a European Economic Recovery programme.”

Of course, in the present climate, a cynic would, with justification, claim that endorsement by the Trades Unions may be the death knell of our Modest Proposal. But then again, Jean Claude Juncker surprised us by taking a leaf out of our proposal in his FT article on 5th December (co-authored with Tremonti) entitled E-bonds would end the crisis. In it, the authors adopt a slightly watered down version of the proposal: Instead of a transfer of member-states’ bonds equal in value to 60% of their GDP, theysuggest 40%. At this stage the precise percentage is neither here nor there. It is the principle that matters.

Most remarkably, Germany’s Finance Minister, Wolfgang Schäuble, did not shoot the idea down. Instead, his measured response was that the issue of eurobonds would require “fundamental changes” in European treaties. Well, he is wrong but this is not the point. The point is that he did not contest neither the logic or the desirability of the proposal. Does this mean the argument has been won? Not in the slightest. What it means is that the debate we had to have is gradually beginning. Hopefully it will do so before the sands of time have  run through our fingers and the eurozone’s unravelling is irreversible.


  • It appears to me that time is quickly running out. The pool of investors for decaying EMU liabilities is permanently shrinking.

    Could capital controls in EMU countries be imposed to delay the collapse of the EMU? The EFSF bond issuance for Ireland holds promise as a mechanism to refinance EMU public and private debt but it is a long time away and at an embryonic stage.

  • I’ve got a small question/remark: the Juncker proposal does not include a tranche transfer, does it?
    Only new financial needs would be financed through the new system.
    So there’s quite a big difference with the ETUC proposal I think.

    • Though it is not made crystal clear, my interpretation is that they do suggest a tranche transfer, as do we. When they talk of eurobonds equalling in value 40% of each country’s GDP, this can only mean tranche transfers of existing debt. The small difference with the ETUC proposal is that Juncker-Tremonti are more cautious by suggesting a 40% limit while the large difference is that they do not suggest (as we and the ETUC do) the mobilisation of the European Investment Bank, in conjunction, with eurobonds in order to effect a new Marhsall Plan for Europe as a whole. Lastly, everyone seems to be neglecting the first part of our Modest Proposal, which recommends a negotiated agreement between the EU states and the European banks for a swap of existing bonds for new ones of a smaller face value and longer maturity.

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