November 22, 2011 / 10:12 AM / 7 years ago

EU's Rehn: euro "redemption fund" worth studying

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”.

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