French region Provence-Alpes-Côte d’Azur has issued a 12 year, AA-rated, €119.5m “socially responsible” bond with 75% of proceeds going to environmental projects (renewable energy, energy efficiency, transport) and 25% to social housing. The bond was significantly over-subscribed. Coupon is 3.6%; joint bookrunners were Crédit Agricole CIB (bravo Tanguy Claquin!) and HSBC France. Insurance companies made up 58% of investors, followed by asset managers at 33%. A third French, almost a third German, and the rest divided between Belgian and Dutch.
Now why can’t we do that too?
I’ve long been an advocate of local bonds for such purpose here in the UK and it’s a core part of the Green New Deal.
A good reason why we don\’t do that, not why we can\’t, is to take a look at the Spanish regions and municipalities. They\’ve just gone through an orgy of such borrowing for an orgy of such investments.
And it has all come to tears, hasn\’t it?
The problem being the political incentives at play. Those in power can borrow to buy votes, the debts coming due long after the end of their political careers.
Allowing such borrowing direct from the markets just increases this temptation.
Now, if Mr. Murphy would like to detail the control structure that would be in place, to make sure that, as just one example, we don\’t end up with a new commercial airport which has not seen one single flight (as in Valencia) then perhas we might take this idea more seriously.
And it isn\’t a purely Spanish problem either. Something not dissimilar, excessive local authority borrowing, went on in Liverpool in Militant days.
By the way, \”the right politicians\” is not a control structure. Quite apart from the incentives being the same for all such scumbags a democratic system does mean that at least occasionally the \”wrong\” politicians will get in.