One Bond to Ring Them All

A Eurobond's needed because
It's one of the euro zone's flaws
That investment was hot
Where the wanting was not
And decidedly cool where it was.

In his latest blog post on saving the euro zone, Reuters' Felix Salmon gets to the heart of the matter:

The solution to this problem is eurobonds. If all the eurozone countries funded themselves jointly and severally, then the yields on European government debt would be very low, and there would be no fiscal crisis in Spain.

As it is, the combination of a single currency and separate fiscal authorities encourages the flow of of government bond investment in the wrong place at the wrong time, if European stability is the desired outcome. Thus, says Felix, "Fund managers at French and German banks were busily moving funds into Spanish and Greek bonds a number of years ago in search of higher yields, and Spanish and Portuguese fund managers are now buying German and Dutch government bonds for added safety, all without incurring foreign exchange risk." It's as if the United States had no Treasury bonds, and all the public debt issue were at the state and local level. The question is: how long before Europe bows to the inevitable, and decides to go joint and several?