How to deal with the economic costs of the coronavirus is dividing the eurozone countries once again.

It should, in a certain way.

Italy and Spain, the EU countries hit hardest by the coronavirus pandemic, are the countries with the most limited space for response. Spain just recovered from one of the deepest financial crises in its history, while Italy has one of the highest debt-to-GDP ratios in the EU. Certainly the largest in absolute terms, and this has been the case for decades.

It is the Italian case that makes any option entailing mutualization of preexisting debt (eurobonds) politically unfeasible. And, I think, rightly so.

The so-called coronabonds proposal to issue common bonds to finance the response to the crisis has been associated with eurobonds and quickly dismissed politically. Not least because of Italy’s tactical mistake to insist on eurobonds and reject other options.

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