The financial mechanism called perpetual bonds, also known in the UK as consol bonds, involve the indebted nation paying a steady stream of interest payments forever. Mr Soros said: “The EU Commission President von der Leyen said that the EU needed at least 1 trillion euros to fight against the novel coronavirus. She did not mention the fight against climate change which would need a similar amount.
“I believe that there is only one way such a large amount could be raised.
“That is by issuing perpetual bonds.”
Mr Soros has called for countries including Germany and the Netherlands to “think again” and issue perpetual bonds to fund the two trillion Euros needed to tackle the coronavirus pandemic and climate change.
The financier has argued that the huge costs involved in addressing the two major crises of our time, coronavirus, and climate change, can only be covered if EU member states authorise the creation of perpetual bonds.
These bonds would be underwritten by member states either acting unanimously or as a “coalition of the willing”.
He suggested the annual interest rates of 0.5 percent on perpetual bonds that countries would pay would be not extravagant and EU countries could afford to meet their repayments.
The other way is a doubling of the EU’s budget.
This is a proposal that is now under consideration.
But, Mr Soros said this would provide only about €100billion, £88billion.
He said that this would only yield one-tenth of the benefit that perpetual bonds could provide.
“This is because they would be issued by the EU as a whole and would automatically be proportional”.
Recently the German constitutional court ruled against the European Central Bank’s purchase of government bonds.
Mr Soros said that this move strengthens the case for issuing perpetual bonds instead.
Published at Tue, 12 May 2020 18:50:00 +0000