Hollande Pushes For Eurobonds Despite Obstinate German Opposition
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Despite tough opposition from Germany, French president Francois Hollande is expected to revisit the idea of Eurobonds at the EU Summit later this week. Hollande is pushing Eurobonds as a way to propel economic growth, but a German official has insisted that the proposal is “the wrong prescription at the wrong time”.
French Socialist Francois Hollande has made it clear that he wants to re-introduce Eurobonds as a way for mutualising European debt.
Despite tough opposition from Germany, French president Francois Hollande is expected to revisit the idea of Eurobonds at the EU Summit later this week. Hollande is pushing Eurobonds as a way to propel economic growth, but a German official has insisted that the proposal is “the wrong prescription at the wrong time”.
French Socialist Francois Hollande has made it clear that he wants to re-introduce Eurobonds as a way for mutualising European debt.
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Speaking to reporters at the end of the inconclusive G8 talks in Camp David, Hollande said Eurobonds are part of his “growth proposals” and added that he has received the support of Italian Prime Minister Mario Monti and Spain’s Mariano Rajoy as well as the European Commision.
Eurobonds, a common, jointly-guaranteed bond of the eurozone governments, has been mooted as a solution to the eurozone debt crisis, as it would prevent markets from differentiating between the creditworthiness of different government borrowers.
But Germany has already signalled that it will not support plans to create eurozone-wide government bonds.
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Germany has long argued that such bonds would lessen the pressure for heavily indebted countries to get their finances in order, and would also likely raise the borrowing costs for countries with better fiscal conditions, such as Germany.
In an interview with a German radio, deputy German finance minster Steffen Kampeter said the bonds would be a “wrong prescription at the wrong time with the wrong side-effects.”
Kampeter added:
[quote] We outright reject Eurobonds as long as fiscal policy is not integrated in Europe … We have always said that as the first step we need solidarity in European finances, and that is the fiscal compact. We need the fiscal compact, we need budget discipline, and we need investments in the future. [/quote]
Despite the reasons, economists have said that the best way of restoring confidence in bonds issued by the eurozone sovereigns is for the debt to be collectively underwritten by all countries. With global leaders impatient for policies that might offer markets some confidence that the single currency will hold together, Germany is becoming increasingly isolated and under pressure.
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