Germany and France reject eurobond plan

Both Germany and France have ruled out common eurozone bonds as a solution to the bloc’s debt crisis, the FT has reported.

German Chancellor Angela Merkel and French president Nicholas Sarkozy are set to meet in Paris tomorrow to discuss potential solutions to the crisis.

But German finance minister Wolfgang Schäuble told Der Spiegel that Berlin has eliminated the policy as an option.

“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,” said Schauble.

According to the FT, senior French officials said it was unlikely a concrete announcement on a eurobond plan would emerge from the Merkel-Sarkozy meeting.

Over the weekend, Italy’s finance minister Giulio Tremonti championed jointly issued bonds as a “master solution” to the eurozone debt crisis.

UK Chancellor George Osborne also backed the idea, and said it would substantially lower nations’ borrowing costs.

In addition, billionaire investor George Soros warned the euro “could implode” if eurozone leaders failed to accept the principle of mutualising debt.

However, despite pushes toward the eurobond solution, most agree it is unlikely Merkel and Sarkozy will implement such a plan. Instead they are expected to reassure markets by stressing the need for greater fiscal and economic co-operation before a eurobond can even be considered.

Eurobonds offer issuers the flexibility to choose the country in which to offer their bond and their preferred currency. They are seen as a solution to the eurozone crisis because they would lower the borrowing costs of struggling bloc members, including Greece, Spain, Italy and Ireland.

 

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