Soros urges EU to use perpetual bonds to finance Covid-19 recovery fund
George Soros says the European Union should raise the €1 trillion needed for a recovery fund to fight the Covid-19 pandemic by selling perpetual bonds.
The principal does not have to be repaid - although they can be repurchased or redeemed at the issuer’s discretion. Authorising this issue should be the first priority for the European council summit on 23 April, he says.
He adds: "Perpetual bonds have three additional advantages that make them appropriate for these circumstances.
"For starters, because perpetual bonds never have to be repaid, they would impose a surprisingly light fiscal burden on the EU, despite the considerable financial firepower they would mobilise. The EU, moreover, would not have to refinance them when they came due, make amortisation payments, or even set aside money (for example, in a sinking fund) for their eventual repayment.
"The EU would be obligated only to make regular interest payments on them. A €1 trillion perpetual bond with a 0.5% coupon would cost the EU budget a mere €5 billion a year. This is less than 3% of the EU’s 2020 budget.
"The second advantage is more technical but almost as important. The market may not be able to absorb a €1 trillion issue all at once. By issuing a perpetual bond, the EU could raise this amount in instalments, without creating a new bond each time.
"The third advantage is that an EU-issued perpetual bond would be a very attractive asset for the ECB’s bond-purchase programmes. Since the maturity of a perpetual bond is always the same, the ECB would not be required to rebalance its portfolio."
