The debate on risk sharing in the eurozone has intensified significantly in recent years. It is an acknowledgment that the eurozone “house” needs to be made more solid but also reflects the concern about limited policy leeway to address future economic downturns. Risk sharing can be public or private sector based and, within each channel, either domestic or cross-border. Public cross-border risk sharing will have an important role to play in strengthening the functioning of the eurozone. However, the challenge is considerable because it raises questions of pre-commitment, conditionality, moral hazard and governance. Finally, risk sharing needs to be considered together with risk prevention, risk management and boosting resilience.
