BERLIN, Nov 22 (Reuters) - The European Union’s economic affairs chief Olli Rehn said on Tuesday that a proposal from the German government’s panel of independent economic advisors for a euro zone debt redemption fund was worth further scrutiny.
“The proposal balances risk-sharing — which is limited in time — with very stringent programmes for fiscal consolidation,” said the European economic and monetary affairs commissioner at a conference in Berlin.
The independent panel of economic advisors, whose views are not necessarily taken on board by the German government, said earlier this month the European Central Bank’s bond-buying programme was putting its credibility at risk and one alternative would be to set up a “redemption pact”.
This would involve countries with sovereign debt above 60 percent of GDP pooling their excess debt into a redemption fund with common liability. They would commit to reforms and see their debts repaid over 20-25 years.
“I believe the proposal is worth studying seriously and further,” said Rehn.
However, German Chancellor Angela Merkel initially responded that such a mechanism would face several constitutional problems that would require changes of European treaties and would be “impossible to implement in reality”.