Debt Crisis: Eurobond plan sparks new political storm between Germany and EC
Published 23/11/2011 | 12:49
TREATY-changing plans for eurobonds as a way out of the economic crisis kicked off a new political storm today.
German Chancellor Angela Merkel insisted that ambitious European Commission ideas in a green paper offered the wrong remedy at the wrong time and made clear she would not support them.
Dutch finance minister Jan Kees De Jager said eurobonds were no magic solution to the crisis "and could even worsen it".
These bonds would replace individual bonds currently being issued by Governments trying to raise funding – many eurozone countries have had problems raising finance this way since the onset of the debt crisis.
Even German, the richest of the eurozone countries, failed to get 35pc of a sale away at auction today.
He and Ms Merkel both said the focus should be on better supervision and enforcement of eurozone budget discipline - something the commission also proposed today.
A package of monitoring measures extends tighter controls announced earlier this year to impose tougher reporting requirements between eurozone treasuries and Brussels - and all euro area governments would have to put in place "independent fiscal councils", as well as basing their budgets on "independent forecasts".
The 17 member countries have until 2015 to get their budget deficits down to 3pc of GDP or output.
Commission President Jose Manuel Barroso said more inspectors will be put in place to police individual government budgets.
He added the Commission would also be able to force a country to be put into an austerity programme.
Under the proposals, the commission, the executive arm of the 27-member European Union, would review draft budgets of eurozone countries by mid-October and demand revisions if they were not in line with rules.
"To return to growth, member states need to raise their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area," Commission President Jose Manuel Barroso said.
"The goals driving this package - economic growth, financial stability, budgetary discipline - are linked to each other.
“We need all of them if we are to move beyond the current emergency towards a Europe in which solidarity is balanced by strengthened responsibility," Mr Barroso said.
And once these controls were in place, the 17 countries now sharing the euro could jointly borrow from the market through "stability bonds".
"The Commission makes clear that any move towards introducing stability bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline," it said in a statement.