Minister for Finance Michael Noonan today said German authorities may be "more open" to a serious discussion on eurobonds after new fiscal rules are in place.
Germany and France have clashed ahead of tomorrow’s EU summit as their divisions deepened over the hotly contested question of jointly issued eurobonds.
Hours after Berlin rejected French demands to put eurobonds on the summit agenda, French finance minister Pierre Moscovici reiterated that the proposal was a “strong idea” and would be on the table in Brussels.
After maiden talks in Berlin with his German counterpart, Mr Moscovici issued a veiled threat to block Wolfgang Schäuble’s nomination to lead the Eurogroup of finance ministers unless Berlin gives ground on new measures to boost economic growth. “There will be a comprehensive solution including the important position of Eurogroup head and there are political issues to be considered,” Mr Moscovici said.
His stance reflects the French view that all outstanding questions in the battle against the debt debacle are interlinked.
The German minister is favourite for the Eurogroup post. Asked whether Paris might block his nomination, Mr Moscovici said there was “nothing personal” in the French position.
Mr Schäuble declined to be drawn and left it to his deputy Steffen Kampeter to dismiss eurobonds as a “prescription at the wrong time with the wrong side effects”. German officials argue that closer economic and fiscal integration is a prerequisite for such bonds, which would enable weakened countries to borrow with the benefit of a common euro zone guarantee.
If introduced now, such bonds would be likely to raise German borrowing costs. Mr Moscovici conceded yesterday that France “can’t force” eurobonds on anyone, and Berlin officials admitted they will “have to give” something else to newly elected president François Hollande.
Discreet talks are under way on the possibility of using the European Stability Mechanism bailout fund to directly rescue banks – another measure resisted by Germany.
Any move to expand the European Stability Mechanism’s mandate in this way would be attractive to the Government, which is trying to reduce the burden on the State from the bailout of Ireland’s banks.
Additional reporting: Bloomberg
