Wednesday April 22, 2015 Search
Weather | Athens
14o C
09o 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)  
Greek PM eyes Merkel support
Mayors resist coalition´s demand to hand over cash reserves
Algerians caught at university sit-in to go on trial
Publishing HIV sufferers’ identities not permitted, says Greek committee
Carrot to pay income tax all in one go
In an effort to bolster crumbling budget revenues, the Finance Ministry is considering offering a 10-15 percent income tax discount for those who choose to pay their dues in a lump sum this ...
IOBE: No agreement would be a huge failure
Greece’s Foundation for Economic and Industrial Research (IOBE) on Tuesday revised this year’s growth estimate from 3 to 1 percent, while its head, Nikos Vettas, described the possible lack ...
Inside Business
BASKETBALL
Second win for the Reds over Barca in four days
Olympiakos is one step from the Euroleague Final Four in Madrid after downing Barcelona on Tuesday for the second time in four days, to edge ahead 2-1 in the best-of-five play-off series. Th...
BASKETBALL
Panathinaikos recovers to beat CSKA for 2-1
Three-pointer master Panathinaikos had the last laugh at the end of Game 3 of its series with CSKA Moscow on Monday winning 86-85 and reducing the Russians' lead to 2-1 in the best-of-five p...
Inside Sports
COMMENTARY
IMF needs to correct its big Greek bailout mistake
The Greek government's mounting financial woes are leading it to contemplate the unthinkable: defaulting on a loan from the International Monetary Fund. Instead of demanding repayment and fu...
COMMENTARY
Tragedy in the Mediterranean
Every time we in the West see yet another video of an atrocity committed by Islamic State or Boko Haram and express our abhorrence, and every time we are shocked to read of a boatload of mig...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Second win for the Reds over Barca in four days
2. Carrot to pay income tax all in one go
3. IOBE: No agreement would be a huge failure
4. Haircut on Greek banks’ collateral?
5. Uncertainty hits bookings from Germany and the UK
6. No leap in relations with Russia
more news
Today
This Week
1. Greek government's popularity takes a hit as talks drag on
2. Tragedy in the Mediterranean
3. No ferries on Labor Day as seamen take industrial action
4. ECB studying curbs on Greek bank support
5. Silence is not an option
6. Two men accused of migrant smuggling face prosecutor over deadly shipwreck
Today
This Week
1. Quarantine for Greek bank subsidiaries in neighboring countries
2. Time to get serious
3. Putting off payments led to Q1 budget primary surplus
4. Obama calls for flexibility in Greek reform talks in brief exchange with Varoufakis
5. Greek government's popularity takes a hit as talks drag on
6. Greece denies report that it is preparing for debt default
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.