Monetary policy

Design considerations of Euro bond – a control engineer’s perspective

Euro bond is on horizon. Here are some factors to be considered in designing the common bond.

Fiscal consolidation is a foundation for Euro bond. Without fiscal consolidation, some nations will take free ride of nations with sound fiscal conditions.

Balance of global control and local control – while the euro bond achieves a global control, local control is necessary in place. My idea is that Euro nations union shall be responsible to issue euro bond and sell them to the market. Member nations, when require fund, can issue their member bonds to Euro nations union. The Euro nations union can charge a penalty rate on top of euro bond yield to member nations with bad fiscal disciplines.

Fault tolerance / isolation – mechanisms shall be in place for a nation, when in trouble, leaving the euro bond union, so that the impact on the overall system is minimized.