France says 'oui' to euro bonds, but Germany says 'nein'
German finance official says Berlin continues to oppose euro bonds, which would create debt backed jointly by European Union nations. EU members meet Wednesday in Brussels to discuss euro bonds and other growth-enhancing policies.
A German official made clear on Monday that Berlin continues to oppose the idea of jointly-issued bonds for the 17-nation eurozone, which France's new president had suggested could be used to create much-needed economic growth and ease the region's financial crisis.Skip to next paragraph
Subscribe Today to the Monitor
At the weekend's Group of Eight summit, German Chancellor Angela Merkel joined French President Francois Hollande and U.S. President Barack Obama in signing on to a statement that called for adding growth-promoting measures to painful cutbacks to fight the eurozone crisis.
How exactly to do that has become a topic of heated debate among European leaders, who will meet Wednesday in Brussels to try to find common ground. Hollande has pushed for issuing debt backed by financially strong countries like Germany to finance growth in weaker countries like Greece or Portugal.
But Germany has long resisted so-called eurobonds, arguing they would lessen pressure for heavily indebted countries to get their finances in order. They would also likely raise borrowing costs for countries in better fiscal shape such as Germany, which currently pay very low interest rates.
Eurobonds would be "a prescription at the wrong time with the wrong side-effects," Steffen Kampeter, a deputy finance minister, told Deutschlandfunk radio.
"We have always said that as a first step we need solidity in European finances, and that is the fiscal compact," a budget-discipline pact that Merkel championed and Hollande has criticized, he said.
In addition to the informal meeting of European Union leaders Wednesday in Brussels, there will be a summit at the end of June at which the issues of economic growth and austerity will likely be the main point of debate. Merkel said last week that "it will be very important that Germany and France present their ideas together at this summit."
Hollande pledged during his election campaign to renegotiate the fiscal compact with a view to placing greater emphasis on growth, but left open when he visited Merkel last week whether he will now stick to calling for a full renegotiation.
"We need the fiscal compact, we need budget discipline, we need investments in the future," Kampeter said.
Underlining the allergic reaction that the idea of being dragged into issuing eurobonds arouses on the center-right in Germany, Michael Meister, a senior lawmaker with Merkel's party, wrote on Twitter: "no one is preventing Hollande going ahead with joint bonds for France and (Italian Premier Mario) Monti for Italy."
Merkel has spoken increasingly about growth over recent months but argues that it makes no sense to try to achieve it by running up still more debt. Government spokesman Georg Streiter said she was very satisfied that the G-8 didn't call for lighting an "economic policy straw fire by throwing tax money into stimulus programs."
France's new finance minister, Pierre Moscovici, was expected in Berlin later Monday for his first meeting with German counterpart Wolfgang Schaeuble.
At home, Merkel needs support from the opposition to ratify the fiscal compact, which requires a two-thirds majority in the German Parliament. It is angling for concessions, such as a commitment to introduce a tax on financial transactions whose proceeds could be used to stimulate growth.
Merkel's party has been calling for quick passage of the budget-discipline by the end of June, and wants Parliament to vote on it at the same time that it approves the eurozone's permanent rescue fund.
Merkel has invited the party and caucus leaders of the parties in Parliament to discuss "the fiscal compact, Europe and everything linked to that" at the chancellery on Thursday, Streiter said.
Making a Difference