Slovakia slams eurozone bonds idea: report

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Slovakia on Friday joined Germany and France in slamming calls for eurozone members to issue joint bonds as a response to the debt crisis that has seen markets push up borrowing rates.

"I say no. That would be a clear step towards a fiscal union," Slovak Finance Minister Ivan Miklos told the SME daily, reacting to the idea floated this week by the head of the Eurogroup of finance ministers, Luxembourg's Jean-Claude Juncker.

On Monday, Juncker and Italian Finance Minister Giulio Tremonti had argued the case for eurozone bonds, but Germany rejected the idea out of hand, followed by France.

The principle of a eurozone bond is that it would enable weaker countries in the 16-member currency bloc to link up with stronger ones such as Germany and France to borrow money, instead of being exposed alone when they issue their own national bonds to raise cash from investors who demand a higher return from them.

In principle, this would reduce the borrowing rates for the weaker countries but increase them for stronger countries.

A rapid rise of bond rates for the weaker countries was a key factor in driving Greece and Ireland to seek rescues from the European Union and International Monetary Fund, and has put severe pressure on Portugal and Spain.

Slovakia, which joined the EU in 2004 and adopted the euro in 2009, was the only holdout against a rescue package for Greece earlier this year.

The 16 members of the eurozone agreed on November 28 on the creation in 2013 of a permanent system for helping countries in financial difficulties to replace current emergency and temporary support arrangements.

The new system has to be approved by all 27 members of the EU when they hold a summit in Brussels on December 16 and 17.

© 2010 AFP

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