In American football there is a play called Hail Mary: it is a desperate attempt at the end of the game. In addition, the attacking formation can only score by throwing the ball far forward and hoping that its own player catches it.
The name implies that it takes a miracle to score that way. That can happen, but usually it doesn't. I recently thought about this when reading Angela Merkel and Emmanuel Macron's proposal to combat the economic damage of the corona crisis. Regularly accompanied by comments that the euro has been definitively saved with the far-reaching French-German proposal. The currency needed a transfer union and that is coming.
Merkel and Macrom propose a €500 billion fund that will be filled with government bonds that the European Union issues on behalf of all EU countries. Brussels then channels that money to the member states in the form of donations. The European Commission launched its own proposal for €750 billion. Brussels lends one-third to the member states and two-thirds are reportedly gifts that are not linked to any conditions.
Unanimous decision required
The Netherlands, Austria, Sweden and Denmark - also known as the 'frugal four' - do not like donations. They just want loans. If necessary, on conditions not available anywhere else, but loans are available. With associated conditions, for example regarding economic reforms. These types of decisions require unanimity, so things could get tense. There is a good chance that a unanimous decision will ultimately be reached, resulting in a compromise between the two extremes.
One of the pressing questions is whether this has definitively saved the euro. I'm not so sure about that. Compare it to a moisture problem in someone's home. The large damp spot is clearly visible and it is not a pretty sight. You can buy a can of paint and paint the wall. The large, ugly spot disappears, but the problem is not solved. Moisture accumulates under the new layer of paint and causes more and more damage. After disappearing from view for a while, the moisture spot penetrates through the paint layer again. It's even bigger and uglier now.
To the Philistines
The fact that you thought you could solve the problem with a paint job the first time can still be attributed to ignorance or naivety. However, using the same 'solution' the second time cannot be justified. If you do it anyway, the damage will be even greater and in time the entire wall will fall to the Philistines. The repair will be much more expensive than if you had opted for a structural solution at the beginning instead of the cosmetic approach.
The euro can only be saved for good by rewarding, not punishing, prudent policies and not rewarding bad policies. It is true that it is good for the German economy to give billions to the weak euro countries. But in the long term that is not a solution. Continuing to give money weakens the strong countries, just like the moisture does to the wall behind that new coat of paint. What saves the monetary union is ensuring that the weak member states become stronger. What is happening now risks making strong countries weaker. It is an economic-political hail mary.
Rising and falling interest rates
On the financial markets, the prospect of joint debt in the eurozone, also called eurobonds, caused Italian, Spanish, Portuguese and other weak eurozone yields to fall. Germany's actually rose. I will not be surprised if interest rates in strong euro countries such as Germany and the Netherlands will eventually rise due to the Eurobonds. That is the price for the renovation of the euro house, which should make the foundation more stable. Only time will tell whether that will work.
One of the things I am looking forward to is how the interest rate on EU government bonds will compare to that on German government bonds. The market thus indicates whether and how much it has confidence in the new course of the euro zone. The spread between the German Bunds and Eurobonds will become the new indicator of the euro's chance of survival.