What are coronabonds?

Coronabonds are an idea mooted by several eurozone countries—most notably France, Italy and Spain—to issue collective debt to combat the economic impact of the coronavirus (Covid-19) outbreak. Nine national leaders of eurozone member states signed a public letter prior to the European Council summit on 26 March 2020 calling for their fellow eurozone governments to consider such a proposal.

Issuing debt collectively—as 19 countries, rather than one—would the reduce the perception among creditors that they might not get their money back, on which interest rates are largely calculated. That would mean the interest rate on such debt would be lower for many member states than if they borrowed alone. Although this initial proposal was not taken up, in July 2020 EU27 leaders agreed to issue collective debt as part of the EU recovery fund, although they were not called coronabonds.