All schemes to enhance global liquidity require a higher level of ﬁscal support and coordination from the international community. Loans to troubled sovereigns or ﬁnancial institutions imply a credit risk that ultimately must be lodged somewhere. Expanded international lending facilities, including an expanded International Monetary Fund, require an expanded level of ﬁscal backup. The same point obviously applies to the European framework for managing internal sovereign debt problems, including proposals for a jointly guaranteed euro zone sovereign bond. Even attainment of a signiﬁcant role for the Special Drawing Right depends upon enhanced ﬁscal resources and burden sharing at the international level.
Keywords: International liquidity; Sovereign debt; Euro zone crisis; Fiscal union; International Monetary Fund; Special Drawing Rights
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.