Monday 16 December 2019

Hollande will push for euro bonds at EU leaders' summit

Luke Baker

France's Francois Hollande will push a proposal for euro bonds at an informal summit of EU leaders in Brussels this week, increasing pressure on German Chancellor Angela Merkel to drop her opposition to the idea.

The new French president raised the idea of bonds jointly underwritten by all eurozone member states during G8 talks at the weekend and intends to raise it again when EU leaders meet on May 23, even if it goes against Ms Merkel's wishes.

"I will outline all growth proposals at this informal meeting," Mr Hollande told reporters at the end of the G8 talks in Camp David, referring to tomorrow's summit.

"Within this packet of proposals there will be euro bonds and I will not be alone in proposing them. I had confirmation on this at the G8."

He is expected to have firm backing from Italian Prime Minister Mario Monti, Spain's Mariano Rajoy and the European Commission.

Germany opposes any early move, saying more progress is needed on coordinating fiscal policies across the eurozone. It has the backing of the Netherlands, Finland and other states.

The rapid deterioration in the eurozone debt crisis over the past month, with Greece's potential exit from the euro no longer taboo, has brought the idea back to the forefront, with many economists and policymakers arguing it would be one of the best ways of restoring market confidence.

"The euro bonds debate is back front and centre and Hollande will have support from other leaders if he raises it," one EU official said. "It's not something that's going to happen overnight -- there's a lot that needs to fall into place first -- but there is a desire for a plan of action toward euro bonds."


In a letter to EU leaders, European Council president Herman Van Rompuy urged them not to have any "taboos" at tomorrow's summit which is intended to focus on specific steps to stimulate growth and create jobs across the bloc.

"It is not too early to think ahead and to reflect on possible more fundamental changes," he wrote. "In many ways, the perspective of moving towards a more integrated system would increase confidence in the euro and the European economy."

Slovak Prime Minister Robert Fico told his parliamentarians yesterday that he would support the French position.

Growth proposals are expected to include boosting the paid-in capital of the European Investment Bank and plans for 'project bonds' underwritten by the EU budget to finance infrastructure. The aim is to agree ideas that can be formally signed off at the next summit of EU leaders on June 28-29.

The victory of Mr Hollande's socialist party in France has not only shifted the eurozone crisis debate towards growth, it has also given renewed impetus to ideas that Ms Merkel has pushed aside in the past, including debt metallisation.

Ms Merkel has said she is not opposed to the principle of jointly underwritten euro area bonds, but believes it can only be discussed once there is much closer fiscal and economic integration across the eurozone.

That remains a long way off and German officials were quick to reiterate that point yesterday.

"(Euro bonds are) the wrong prescription at the wrong time with the wrong side-effects," German Deputy Finance Minister Steffen Kampeter said.

With Greece facing elections on June 17 that could hasten its departure from the eurozone if voters back anti-bailout parties, Ms Merkel was put under some pressure at the G8 talks but refused to budge on her insistence that any growth measures could not come via more deficit spending. (Reuters)

Irish Independent

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