States or state owned financial institutions can develop a debt guarantee product at a national level 3). It would be similar to the monoline guarantee if it is an on-demand guarantee. State-aid issues have to be addressed by establishing a guarantee fee that approximates a market price and by offering the guarantee equally to all bidders on a given project. Like the IFI guarantee, a state guarantee would solve the problems of investor analytical capability, increases liquidity by creating a homogeneous triple-A risk asset class encompassing all debt benefiting from the guarantee, and, potentially, creates a controlling creditor.
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3) France has put in place a €10b guarantee programme for PPPs, which could cover capital market issues. It is a partial guarantee only, limited to 80% maximum of senior debt. It is negotiated and administered by the MAPPP. A risk adjusted guarantee fee is applied. Portugal and more recently Spain have announced similar programmes.