Bundesbank chief slams eurobonds

17th July 2011, Comments 0 comments

The head of Germany's Bundesbank central bank attacked Sunday proposals to issue eurobonds guaranteed by eurozone states as a way of helping Greece, saying it would lead to a "transfer union."

"Nothing would destroy more quickly and in a more lasting fashion incentives for a solid budget policy that joint guarantees for sovereign debt," Jens Weidmann told the Bild am Sonntag weekly in an interview.

"But this is exactly what some politicians and economists are proposing in the form of eurobonds as a solution to Greece's problems," he said.

"The result would be European taxpayers, and first and foremost German ones, vouching for Greece's entire national debt. It would be a step towards a transfer union, something which Germany has correctly opposed thus far."

He also said that restructuring Greece's mammoth debts would also fail to solve the stricken eurozone country's problems.

"Greece consumers considerably more than it produces, the state budget is in high deficit. As long as none of this changes, even cutting the debt would not produce a real improvement," Weidmann told the paper.

The idea of eurobonds issued and guaranteed by countries with better credit ratings that Greece, therefore obtaining lower borrowing rates, has long been floated as a way of helping Athens and other struggling eurozone members.

But German voters are wary of any scheme that would see their taxes going towards other countries -- a so-called "transfer union" -- while eurobonds could also raise the borrowing costs of countries backing them, critics say.

A poll released by the Bild am Sonntag meanwhile showed 60 percent of those questioned in Europe's biggest economy with litle or very little trust in the euro single currency, up from 54 percent in December.

The paper did not say how many people were questioned.

The 17 eurozone nations are due to hold an extraordinary summit on Thursday in Brussels on ways to provide fresh support for Greece and put an end to the eurzone debt crisis amid fears it could spread to Spain and Italy.

© 2011 AFP

0 Comments To This Article