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Eurobonds seen as cure-all
Source: Agencies |
November 22, 2011, Tuesday
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Print Edition
Print Edition
THE European Commission chief yesterday said he wants to introduce eurobonds issued jointly by the 17 euro nations as an effective way to tackle the financial crisis, an idea that puts him on a collision course with German Chancellor Angela Merkel.
Jose Manuel Barroso said a eurobonds plan makes sense if linked to fiscal rigor among the member states sufficiently stringent to make it impossible for profligate nations to live on the back of budget-conscious countries.
Germany has opposed the principle of eurobonds since it would expose its taxpayers to the bad debt of weaker countries. As Europe's largest economy, Germany already funds the bulk of the existing bailouts.
Still, Barroso said he and the Commission "are going to put those ideas forward" tomorrow.
In a study that was leaked to the press and is due to be presented tomorrow, the Commission said replacing national bonds with one jointly-backed bond would be the most effective way to tackle the financial crisis.
Barroso insisted that any such plan would have to be matched by tight financial and budgetary coordination. "We need more discipline in the euro area because we are in the situation today ... because of lack of discipline, because governments of Europe did not respect their commitments," he said, with Greek Prime Minister Lucas Papademos standing at his side.
Since Greece pushed the eurozone into its ever-worsening financial mess last year, many member states have seen their cost of government borrowing rise to record levels. Germany's borrowing rates, meanwhile, have dropped sharply as investors buy up its bonds as a safe haven. That has created a huge imbalance in debt markets within a zone ruled by one currency.
Germany has long been reluctant to bail out member states like Greece, Ireland and Portugal, insisting it was up to their governments to live by sound economic principles and win investor confidence.
The German government made clear that it wasn't budging on its opposition to the idea of eurobonds as a quick-fix solution to the crisis.
"The chancellor and the German government do not share the belief of many that eurobonds would be a kind of cure-all for the crisis now," said Chancellor Angela Merkel's spokesman, Steffen Seibert.
Jose Manuel Barroso said a eurobonds plan makes sense if linked to fiscal rigor among the member states sufficiently stringent to make it impossible for profligate nations to live on the back of budget-conscious countries.
Germany has opposed the principle of eurobonds since it would expose its taxpayers to the bad debt of weaker countries. As Europe's largest economy, Germany already funds the bulk of the existing bailouts.
Still, Barroso said he and the Commission "are going to put those ideas forward" tomorrow.
In a study that was leaked to the press and is due to be presented tomorrow, the Commission said replacing national bonds with one jointly-backed bond would be the most effective way to tackle the financial crisis.
Barroso insisted that any such plan would have to be matched by tight financial and budgetary coordination. "We need more discipline in the euro area because we are in the situation today ... because of lack of discipline, because governments of Europe did not respect their commitments," he said, with Greek Prime Minister Lucas Papademos standing at his side.
Since Greece pushed the eurozone into its ever-worsening financial mess last year, many member states have seen their cost of government borrowing rise to record levels. Germany's borrowing rates, meanwhile, have dropped sharply as investors buy up its bonds as a safe haven. That has created a huge imbalance in debt markets within a zone ruled by one currency.
Germany has long been reluctant to bail out member states like Greece, Ireland and Portugal, insisting it was up to their governments to live by sound economic principles and win investor confidence.
The German government made clear that it wasn't budging on its opposition to the idea of eurobonds as a quick-fix solution to the crisis.
"The chancellor and the German government do not share the belief of many that eurobonds would be a kind of cure-all for the crisis now," said Chancellor Angela Merkel's spokesman, Steffen Seibert.
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