Eurobonds only with tougher fiscal checks: EU's Rehn

22nd November 2011, Comments 0 comments

The introduction of eurobonds, seen by many as a possible solution to the eurozone debt crisis, can only happen alongside stricter policing of budgetary policies, the EU's top economic official said on Tuesday.

Speaking at a Berlin conference, Economic and Monetary Affairs Commissioner Olli Rehn also said he was confident that the new Italian government could pull through its current difficulties if it implemented the right reforms.

"For me, it is clear that any type of eurobonds would have to go in parallel, hand in hand, with substantially reinforced fiscal surveillance and policy coordination, as an essential counterpart," he said.

"In other words, a profound reform of economic governance towards deeper policy integration is a necessary precondition for any serious move towards introducing stability bonds," added the commissioner.

On Wednesday, the European Commission is expected to publish proposals for eurobonds that will also contain suggestions on stricter policing of eurozone members' budgets.

According to a draft of the proposals seen by AFP, the EU executive will suggest the introduction of so-called "stability bonds" which they believe could bring down borrowing costs of struggling nations "relatively quickly."

However, the idea of eurobonds has run into opposition in Germany, which fears that as Europe's biggest and most creditworthy economy, it would have to bear the costs if eurozone debt were pooled.

Merkel's spokesman reiterated Berlin's scepticism on Monday, saying Germany did not share the opinion that eurobonds would solve the problem and that it could prevent Europe tackling the problem at its roots.

However, a Commission source said Brussels detected "some movement" in the German position, so long as eurobonds went hand-in-hand with strong fiscal checks.

© 2011 AFP

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