Merkel: Wrong time for eurobonds debate
Eurobonds are not a long-term solution to the debt crisis and it is too early to be debating them, German Chancellor Angela Merkel said Tuesday, as the European Commission readies proposals on the issue.
"If we have to have this debate (on eurobonds), then it is more appropriate to have it at the end (of the crisis) and therefore I do not think it is right to have it now, in the middle of the crisis, as if it were the answer," she said.
"In the long term, it is not," she told a business conference in Berlin.
On Wednesday, the European Commission is expected to publish proposals for eurobonds that will also contain suggestions on stricter policing of eurozone members' budgets and economic policies to ensure they meet EU rules.
According to a draft of the proposals seen by AFP, the EU executive will suggest the introduction of so-called "stability bonds" that it believes 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 stressed the importance of acting quickly to stem the crisis, reiterating her position that "if the euro fails, then Europe fails.
"Extraordinary situations require us to act extraordinarily quickly," she said, repeating her wish to see changes to the EU treaties to improve the framework of the euro area and punish those breaking the deficit rules.
She also forcefully rejected the idea of making the European Central Bank the lender of last resort, saying that this "wouldn't work."
In reaction to soaring borrowing costs suffered by those on the periphery of the eurozone and, increasingly those in the core, Merkel said markets were perhaps "over-estimating" the risks attached to those sovereign debts.
Since the euro came into circulation in 2002, "I believe ... the markets completely underestimated differences in competitiveness (between eurozone member states) and now they are completely overestimating the risks and divergences," she said.
© 2011 AFP