Brussels, 17/12/2010 (Agence Europe) - For now, European leaders have dismissed the idea of using eurobonds as a way to face up to the financial crisis, even if the debate is to continue on this in coming months. The idea of this financial instrument, which would allow several countries to launch common bond borrowing in order to pool risks, was reactivated last week by the Luxembourg prime minister, Jean-Claude Juncker, who is also president of the Eurogroup.
A difficult idea needs to germinate. European Council President Herman Van Rompuy said a good idea had to mature, that it was not possible to use a good idea too soon. Germany, however, which currently borrows at a rate lower than the European average, is opposed for now to using the new instrument.
It considers, and is backed by France on this, that some states might stop making any effort to keep their debt under control. “In 2011, we must focus on matters that truly provide an opportunity for fulfilment”, German Chancellor Angela Merkel said in answer to a question on eurobonds. This is a “strange system”, said French President Nicolas Sarkozy, saying that the possibility of transferring the debt from one country at European level “makes no sense” if one recognises that states have the sovereign freedom to fix their rates of taxation on corporate profits. Sweden's Prime Minister Fredrik Reinfeldt took the view that, at any rate, it was “not really the moment to take a decision on this”.
Prospect of feasibility test. Other leaders are, however, keen on setting up eurobonds, beginning with Portugal's Prime Minister José Socrates who asserts: “Eurobonds are a good idea that I have supported for a long while”. “It is an idea that is making headway”, said his Belgian counterpart, Yves Leterme. “The decision will not be taken in coming days or weeks” but “it is an inevitable element that will see light of day sooner or later”, he added. Given the reticence of a number of states, Jean-Claude Juncker told the press that his proposal would not lead to unified increased rates of interest. It is not a matter of “merging all the public debt of all the EU member countries but of globalising at the European central level part of it”. “By creating Eurobonds, we'll create a large European bond market (…) and this will give additional liquidity” which “could easily lead to a lowering of interest rates, even lower than they are in Germany or in the Netherlands or in Luxembourg for the time being”. Discussing such a mechanism will certainly not take place “now”, said Italian Council President Silvio Berlusconi, who added that, if eurobonds already existed, he would certainly buy them immediately rather than buy bonds for a single country as Europe gives guarantees. He even suggested launching a study on eurobonds, a mechanism that is good to study in depth, even if one is aware that it is not for today, or even tomorrow, and that all this will take some time. Commission President José Manuel Barroso also called for prior “technical feasibility” work to be carried out before knowing whether such an idea can be put into effect. (B.C./A.By./A.N./I.L./H.B./transl.jl)