Germany dismisses eurobond plan ahead of EU commission proposals
Baku, November 22 (AZERTAC). The European Commission faces a tough sell in Germany as it advances long-awaited plans for a “eurobond” system for countries in the single currency to issue debt with a common euro zone guarantee.
Even before the commission unveils its proposals tomorrow, Berlin`s response to the initiative has been as swift and dismissive as always.
“The chancellor and the federal government do not share the belief of many that eurobonds would be a cure-all for the crisis,” said Steffen Seibert, government spokesman.
“Rather, they see the danger that such eurobonds would distract from getting to the root of the problem.”
With opposition seen across the board in Angela Merkel`s coalition, the initiative reflects concern in Europe that the authorities are running out of options to tame the expanding debt crisis. The commission`s proposal comes as the emergency worsens rapidly, with the triple-A credit rating of France under pressure, and Italy and Spain in the grip of constant market pressure. It sets out three different models for the introduction of a form of debt it describes as a “stability bond” instead of the “eurobond” which is routinely rejected in Germany. The first idea is to issue bonds with joint and several guarantees, which means euro zone countries become jointly liable for their share of the guarantee on each others` debt and the guarantees of other countries.
The second option for a partial common guarantee on member state debt follows a plan from the Bruegel think-tank in Brussels and a panel of German experts.
This system would be designed to give an incentive to countries to stay within the 60 per cent of debt/GDP limit in the EU treaty by enabling them to issue eurobonds up to that limit while taking sole responsibility for their own debt issuance above it.
The third option embraces a system in which debt would be backed by several but not joint guarantees. In this scheme, each guaranteeing country would be liable only for its share of liabilities under the bond according to a specific contribution key.
While making it clear that an appreciable toughening of budget oversight would be required to ensure the system works, the commission`s paper says the initiative could “possibly” provide the necessary resources to stem the crisis.
“A significant number of political figures, market analysts and academics have promoted the idea of common issuance as a potentially powerful instrument to address liquidity constraints in several euro-area member states,” say drafts of its paper.
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