Saturday November 22, 2014 Search
Weather | Athens
18o C
10o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Euro area bonds to be discussed at informal EU summit, officials say

French President Francois Hollande and like-minded euro zone leaders are expected to promote the idea of mutualized European debt at an informal summit in Brussels this week, increasing pressure on German Chancellor Angela Merkel to drop her opposition to the proposal.

Senior EU and US officials said Hollande raised the topic of euro area bonds - bonds jointly underwritten by all euro zone member states - during G8 talks at the weekend and would again push it when EU leaders meet in Brussels on May 23.

He is expected to have backing from Italian Prime Minister Mario Monti, Spanish Prime Minister Mariano Rajoy and the European Commission, which has long been a backer of euro area bonds, producing a feasibility study on them late last year before the initiative was pushed to the background.

The rapid deterioration in the euro zone debt crisis over the past month, with Greece's potential exit from the 17-country currency bloc no longer taboo, has brought the idea back to the forefront, with many economists and policymakers arguing it would be one of the best ways of restoring market confidence.

"The euro bonds debate is back front and center and Hollande will have support from other leaders if he raises it,» one EU official said.

"It's not something that's going to happen overnight - there's a lot that needs to fall into place first - but there is a desire for a plan of action toward euro bonds."

The summit on Wednesday is scheduled to focus on growth and investment, with European Council President Herman Van Rompuy wanting leaders to agree specific steps to stimulate growth and create jobs across the EU.

Proposals are expected to include boosting the paid-in capital of the European Investment Bank and plans for 'project bonds' underwritten by the EU budget to finance infrastructure.

The aim is to agree ideas that can be formally signed off at the next summit on June 28-29.

But the victory of Hollande's socialist party in France has not only shifted the euro zone crisis debate more towards growth, while not abandoning austerity, it has also given renewed voice to ideas that Merkel has successfully pushed aside over the past two years, including debt mutualization.

Merkel has said she is not opposed to jointly underwritten euro area bonds per se, but believes it can only be discussed once the conditions are right, including much closer economic integration and coordination across the euro zone, including on fiscal matters.

That remains a long way off.

In its paper on what it calls «stability bonds», unveiled in November, the Commission said it was not an idea that could be deferred forever, saying the severity of the crisis - which has only worsened since - meant quicker action needed to be taken.

"While common issuance has typically been regarded as a longer-term possibility, the more recent debate has focused on potential near-term benefits as a way to alleviate tension in the sovereign debt market,» the paper said.

"In this context, the introduction of Stability Bonds would not come at the end of a process of economic and fiscal convergence, but would come in parallel with further convergence and foster the establishment and implementation of the necessary framework for such convergence."

That is language that Monti, an economist and former European commissioner, has supported in the past and is expected to second in the discussions on Wednesday.

"Whatever the timeframe was before on moving towards euro bonds, it's now even shorter because of the worsening in the crisis,» a second EU official said.

"There needs to be a discussion on jobs and growth, but there also needs to be a discussion on specific steps that can be taken towards euro bonds.

Several proposals, aside from the Commission's, have already been circulated for well over a year. One, called a debt redemption fund, was proposed by a group of German 'wise men'.

That proposal would involve mutualizing the debts of euro zone countries over and above 60 percent of GDP - the debt limit set out in the EU's stability and growth pact.

Another idea put forward by the Bruegel think tank would involve mutualizing all debt up to 60 percent of GDP, with any debt over and above that limit having to be underwritten by the specific country alone.

Economists have argued that the best way of restoring confidence in bonds issued by euro zone sovereigns is for the debt to be collectively underwritten by all the countries. However, that would put a large burden on Germany, the EU's biggest economy, to finance the debts of other member states.

As well as resolving the region's debt problems, EU leaders are also expected to discuss how to tackle a deepening banking crisis, with the banking systems in both Greece and Spain under severe strain.

One idea is to allow the European Financial Stability Facility, the euro zone's 700 billion euro rescue fund, to help recapitalize banks directly, rather than lending to individual countries that then lend it on to the banks.

But Germany opposes direct lending by the EFSF to banks, saying it is up to individual member states to ensure the stability of their banking sectors. [Reuters]

ekathimerini.com , Monday May 21, 2012 (12:52)  
Image of artwork showing humans in blender taken out of schoolbooks
Simitis supports Venizelos over new movement
Two businessmen to be questioned in arms kickbacks probe
No swift breakthrough expected in troika talks
More cash for banks with same papers
Greek banks will be able to draw additional liquidity from the European Central Bank after Frankfurt issued a guideline on Friday that revises the “haircut” applying to securities issued or ...
Growth to fuel rise in revenues
Finance Minister Gikas Hardouvelis on Friday tabled in Parliament the final draft of the 2015 budget which is in line with the targets of the country’s bailout agreement with its creditors a...
Inside Business
INTERVIEW
Tokyo hopes to change the world
The 2020 Summer Olympic and Paralympic Games in Tokyo will serve as a springboard for the rebuilding of Japan’s image and economy following the triple blow of the earthquake, tsunami and nuc...
BASKETBALL
Big win for Greens, tight one for Reds
Panathinaikos scored a crucial as well as emphatic away win at Turow on Thursday that should see it qualify from its tough group to the top 16 of the Euroleague, while Olympiakos saw off vis...
Inside Sports
COMMENTARY
Give Greece a chance
Greece's creditors are testing the country's endurance - again. If they keep pressing, they could split the euro area apart, which would be a disaster for them as much as for Greece. They ne...
COMMENTARY
‘Who lost Greece?’
If, by unhappy chance, Greece’s efforts to create a more efficient economy and more just society should fail, if it turns out that all our sacrifices were in vain, who will be to blame? The ...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Image of artwork showing humans in blender taken out of schoolbooks
2. More cash for banks with same papers
3. Simitis supports Venizelos over new movement
4. Growth to fuel rise in revenues
5. Commercial property draws interest from investors
6. Sony chooses Piraeus as its entry point to Europe
more news
Today
This Week
1. Give Greece a chance
2. Cosco’s Greek unit adds multinational rail-freight client
3. No breakthrough after marathon conference call
4. Israel backs East Med pipeline project
5. Education Ministry mulls over introducing Albanian language classes
6. Greece says EU/IMF lenders disagree with 2015 budget deficit estimate
Today
This Week
1. Double quake on Atalanti fault line rattles Greek capital [Update]
2. Greece and Poland switch roles as young Greeks head to vibrant Eastern European country for better prospects
3. Constructively disrupting the Greek start-up ecosystem: What will the impact be?
4. Anti-junta uprising anniversary to be marked amid tight security
5. Biden heads to Istanbul amid tension over Cyprus EEZ violation
6. Carlsberg takes control of Greek brewer Olympic Brewery [Update]
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.