No Eurobonds, “Not as Long as I Live”: Merkel
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Eurobonds will be back on the agenda as European leaders gather for a crisis summit later this week, but Germany, who has always been critical of the proposal, has once again taken the hard-line stance with Chancellor Angela Merkel declaring that Europe would not share total debt liability “as long as I live”.
Eurobonds will be back on the agenda as European leaders gather for a crisis summit later this week, but Germany, who has always been critical of the proposal, has once again taken the hard-line stance with Chancellor Angela Merkel declaring that Europe would not share total debt liability “as long as I live”.
As European leaders prepare for a closely-watched crisis summit on Thursday, a report obtained by Reuters reveals that the “eurozone could created a treasury for the single currency and issue euro bonds as the final stage of a fiscal union.”
The report, prepared by European Commission President Jose Manuel Barroso, European Council President Herman Van Rompuy, European Central Bank President Mario Draghi and President of the Eurogroup Jean-Claude Juncker, also said:
[quote] Steps towards the introduction of joint and several sovereign liabilities could be considered, as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance. [/quote]
To make joint debt issuance, such as Eurobonds, possible, the influential quartet say eurozone countries should be able to set annual deficit and limits for individual member countries, and be able to make decisions on sovereign budgets if they broke fiscal commitments.
Related News: Eurozone Could Cede Sovereignty on National Budgets to EU
Some countries have touted Eurobonds as an effective solution to the eurozone debt crisis, as aggregated liabilities issues by the 17 member euro bloc would pool the risks by preventing markets from differentiating between the creditworthiness of different government borrowers and hence lower the borrowing costs for the PIGS (Portugal, Italy, Greece and Spain) who have seen their interest rates soar.
Yet, it also unnecessarily burdens countries such as Germany who have better economic and fiscal health.
Germany, the eurozone’s largest economy and paymaster, has vehemently insisted that Eurobonds are the “wrong prescription at the wrong time”, and that it should not be forced to share total debt liability with weaker countries.
At a closed-door meeting yesterday with German policymakers, she called the idea of Eurobonds “economically wrong and counterproductive”, and added:
[quote] I don’t see total debt liability happening as long as I live. [/quote]
Related News: Germany Says “No” to Euro Bonds
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