The initiatives taken by the ECB in mid-March 2020 flatten the structure of interest rates and ensure
short-term sustainability for the EMU countries with high government debt/GDP ratios. But the
challenges posed by the pandemic require a huge amount of public spending and therefore threaten
this sustainability in the long term.
This paper proposes ‘contractual arrangements’ between high-debt countries and European
institutions, namely the Commission and the ESM as financial donor, which transfer grants (a ‘gift’) to
high-debt countries to cover the national public expenditures resulting from the impact of the
pandemic. In exchange, the beneficiary countries would share the design and implementation of these
public expenditures with the European institutions, thereby giving up a portion of their fiscal
sovereignty
