European Commission to publish eurobond report: Rehn

5th August 2011, Comments 0 comments

The European Commission will publish a report later this year on the possibility of issuing eurobonds guaranteed by eurozone states, Economic Affairs Commissioner Olli Rehn said Friday.

As it searches for solutions to the sovereign debt crisis engulfing the 17-nation currency union, the Commission, the European Union's executive arm, will take a serious look at eurobonds, Rehn told BBC radio.

"Once there is an agreement on a serious reform of (EU) economic governance, which is expected in September, then the Commission will afterwards present a report on the feasibility of eurobonds," he said.

The report would consider how eurobonds could "improve fiscal discipline and increase liquidity in the markets," he said.

The idea of eurobonds issued and guaranteed by countries with better credit ratings than debt-laden Greece has long been floated as a way of helping Athens and other struggling eurozone members.

But the suggestion has proved controversial, with Germany, Europe's biggest economy, opposed to the scheme since many there see it simply as Berlin handing over taxpayers' money to EU states which have not followed the rules on keeping their finances strong.

In Friday's interview, Rehn also defended remarks by European Commission president Jose Manuel Barroso on Thursday, insisting that his warning that the eurozone crisis was spreading had not sparked market turmoil.

"In fact what Barroso underlined ... was that it is now essential to speed up the implementation and the parliamentary approval in the member states in order to make this agreement of July 21 materialise," he said.

Eurozone leaders agreed a second bailout for Greece at an emergency summit in July but the technicalities have not been settled, with many requiring parliamentary approval.

Analysts said this fact alone has added to the pressure on the markets as investors worry that the EU will not actually make good on the accord.

Global stocks plunged in the wake of Barroso's warning and they continued to drop Friday with European markets initially diving 3.0-4.0 percent.

Rehn also refused to rule out an expansion of the EU's rescue fund, the European Financial Stability Fund (EFSF).

"To be effective the EFSF needs to be credible and respected by the markets and therefore it will need to be continuously assessed once up and running in its operative form," he said.

© 2011 AFP

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