THE GERMAN and French governments are set to rule out eurobonds as a solution to the euro zone debt crisis, despite renewed pressure before a meeting between Chancellor Angela Merkel and President Nicolas Sarkozy in Paris on Tuesday.
This is likely to be welcomed by Minister for Finance Michael Noonan, who last week stated his preference for a system of guarantees to be put in place that would allow Ireland to access global bond markets again at competitive rates of interest.
Wolfgang Schäuble, German finance minister, told Der Spiegel magazine that Berlin remained opposed to such a policy of introducing eurobonds.
“I rule out eurobonds for as long as member states conduct their own financial policies, and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity,” he said.
French officials also played down speculation that the subject would be raised at the meeting. “Eurobonds would require a much more determined integration of budgetary policy,” said one official.
“We do not have that today. It could be a long-term project, but you cannot have eurobonds and at the same time national economic and budgetary policies.”
Others within the euro zone take a different view. Over the weekend, Giulio Tremonti, Italy’s finance minister, described jointly-issued bonds that would lower some struggling states’ borrowing costs as a “master solution” to the euro zone crisis,
George Osborne, the UK chancellor, said on Thursday the idea required “serious consideration”, while investor George Soros said on Friday the euro “could implode” if euro zone leaders failed to accept the principle of mutualising debt.
A spokeswoman for the Department of Finance reiterated Mr Noonan’s previous comments about being “available for a discussion on the eurobonds” and said Ireland would be monitoring the situation closely.
Ms Merkel and Mr Sarkozy are expected to reiterate the need for greater fiscal and economic co-operation before a eurobond can be considered.
They hope to reassure markets by flagging joint resolve to implement emergency measures agreed at the last summit on July 21st.
Paris is hoping to make progress on proposals to improve euro zone governance.
There was speculation at the weekend that Ms Merkel and Mr Sarkozy could announce measures for more fiscal co-operation.
But officials close to Ms Merkel said the meeting would focus on proposals for long-term reforms of euro zone governance, not on short-term measures to calm the markets. – (Additional reporting by the Financial Times)
