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On public debt in the euro area

The 2008 crisis led to a strong rise in public deficits and debts in most developed economies. These debts and deficits are currently Keynesian (i.e. required for macroeconomic stabilisation), as shown by low inflation and interest rates levels. Euro area public debts are not guaranteed by a lender of last resort. The rules enshrined in the Stability Pact and the Fiscal Treaty have no economic basis. The paper discusses federalist proposals such as a European Debt Agency or a European Treasury, and unconventional solutions, such as debt monetisation, buyback by the ECB, and even debt cancellation. It concludes in advocating for a rule-free economic policy coordination.