The European Redemption Fund: A Comparison of Two Proposals

This paper proposes a redemption fund for the euro zone countries alternative to that recently proposed by Doluca et al. (2012a) - The European Redemption Pact: an Illustrative Guide, GCEE Working Paper No. 2, February - and in coherence with a previous proposal of one of the author. In doing so, we envisage a country-specific amortization scheme in which the sovereign debts exceeding the 60%-ceiling of GDP is redeemed in 30 years. The paper shows that our redemption scheme is cheaper and less constraining than that proposed by Doluca et al. (2012a). Also, the paper shows that fiscal brakes - such as those required by the Fiscal Compact - are not necessary for the complete redemption of the Fund.