Before Europe launches common bonds or so-called eurobonds, it must first establish a true fiscal union, German Finance Minister Wolfgang Schaeuble said in a newspaper interview Tuesday.
“The government has always said that before we start talking about joint debt management, we need real fiscal union,» Schaeuble told the business daily Handelsblatt.
The topic of eurobonds — pooling the debt of eurozone member states to drive down borrowing costs — has split the 17-nation bloc and was the main sticking point at an informal EU summit last month.
Nevertheless, creating a fiscal union was a «medium-term project,» the finance minister insisted.
A first step was the fiscal pact, agreed to by 25 of 27 European Union members and which is designed to shore up the turmoil-hit eurozone by penalising countries that fail to keep their deficits in check.
A banking union, too, would be another stage.
“We should take one step after another,» Schaeuble said.
The path Europe has to take «is not an easy one and it won’t always be fair,» he warned.
While Europe’s leaders try to come up with a way out of the region’s long-running debt crisis, Germany insists there is no quick fix or miracle cure and no way round the hard slog of fiscal consolidation and structural reforms.
France is spearheading a drive for eurobonds, in effect pooling the debt of eurozone countries, in order to raise fresh debt funding.
It and other eurozone states say eurobonds could fund desperately needed growth policies after years of austerity have pushed the economy into recession.
But Germany is firmly opposed to such a move, arguing it takes away the pressure for reform in spendthrift countries and also undermines market discipline.
A banking union has also been suggested by European Commission President Jose Manuel Barroso, allowing all 17 euro-zone countries to share the burden of bank failures.
But Germany, again, believes such a move must be part of a longer process of deeper integration of eurozone budget and financial policies.
Greater integration would give more powers to the European Commission, the EU’s executive arm, and effectively require member states to give up significant national sovereignty.
“We don’t see now how such considerations would help to overcome the current questions,» a finance ministry spokesman said last week.
“You know the fiscal pact is the beginning of the fiscal union and in the longer term you could imagine stricter oversight,» he added.
“Such questions will certainly be discussed» at a forthcoming meeting of EU leaders in Brussels on June 28-29, the spokesman said. [AFP]