Saturday 25 November 2017

Debt Crisis: Germany denies reports it has modified stance on eurobonds as summit opens

Richard Hubbard

GERMANY’S finance ministry has denied reports that suggested it had modified its opposition to eurobonds and reaffirmed its long-held view that they could only come at the end of a process towards fiscal union.

Earlier the Wall Street Journal quoted Finance Minister Wolfgang Schaeuble as saying in an interview published on its website that Germany may be willing to move sooner than expected to accept shared liability of eurozone debt.

Asked to comment on the reported comments, ministry spokesman Martin Kotthaus said: "This is not true."

"We've always said that we can talk about shared debt management only at the end of a process toward a genuine fiscal union," he told Reuters.

Meanwhile, officials were working intensively on short-term ways to stabilise Spanish and Italian borrowing costs today as EU leaders opened a summit as divided as ever on how to resolve the eurozone's debt crisis.

French President Francois Hollande, arriving for his first full European Union summit after six weeks in office, said he expected agreement on emergency steps to help euro zone countries whose cost of credit has reached unsustainable levels.

"I have come here to get very rapid solutions to support countries that in the greatest difficulty on the markets even though they have made considerable efforts to restore their public finances," he told reporters.

Three EU sources said work was focused on activating the euro zone's existing temporary EFSF rescue fund and a future permanent ESM bailout fund to buy Spanish and Italian bonds as they are issued to underpin their bond auctions.

The sources said an agreement could be clinched at a meeting of the 17 euro zone leaders on Friday after the regular 27-nation EU summit ends.

"We've got to look at existing instruments, and both the EFSF and the ESM, once it is active, have the capacity to buy bonds in the primary market. That's the area that makes sense to operate on," one official said.

Italy and Spain would still have to request assistance, which they are loath to do, and would be subject to fiscal policy conditions and international monitoring. But they might not be required to do any more in austerity and structural reforms than they have already undertaken, the sources said.

Dutch Prime Minister Marc Rutte, leader of one of the hardline north European creditor countries, said the euro zone could use its existing tools to solve the market problem.

"We are not ready to talk about new instruments. There are existing instruments," he said. Rutte rejected German Chancellor Angela Merkel's demand to transfer more sovereignty over national budgets and economic policies to EU institutions.

Positions were so far apart that even before Thursday's meeting began EU sources said there was the prospect of another summit in July to try to bridge the differences.

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