Europe debt crisis: Germany denies 'elite' plan

Europe debt crisis solution would be joint-issued euro bonds. Germany denies reports that it has initial plans to solve Europe debt crisis with euro bonds issued by nations with triple A credit.

Thomas Peter/Reuters
German Finance Minister Wolfgang Schaeuble speaks during a federal budget debate in the Bundestag, the lower house of parliament, in Berlin, last week. As Europe debt crisis deepens, Die Welt reported that initial plans have been drawn up to issue euro bonds backed by 'elite' euro nations. The finance ministry denied the report.

Germany insisted Monday that it has no plans to float bonds together with the eurozone's five other triple A rated nations and use the proceeds to provide assistance to some of the single currency bloc's indebted members, such as Italy and Spain.

The Finance Ministry's denial came as the International Monetary Fund also dismissed reports it was planning a €600 billion bailout fund for Italy, and credit rating agency Moody's warned that the "rapid escalation" of Europe's financial crisis is threatening the credit worthiness of all eurozone governments, even the most highly rated. Only six of the eurozone's 17 countries have the top rating — Germany, France, Austria, the Netherlands, Luxembourg and Finland.

Despite the denials, the markets appear to be in a forgiving mood Monday. With the future of the euro hanging in the balance, according to many in the markets, there are hopes that the recent signs of deterioration in the debt crisis will finally get Europe's leaders to agree on a package of measures that can ease market concerns over whether the euro currency itself can survive. The Stoxx 50 of leading European shares was up 2.6 percent, while the euro was 0.6 percent higher at $1.3362.

One proposal that's often been touted as a long-term solution is the issuance of eurobonds, whereby the 17 euro nations pool together to raise money in the markets. However, Germany has opposed the principle of eurobonds since it would expose its taxpayers to the bad debt of weaker countries. As Europe's largest economy, Germany already funds the bulk of the existing bailouts.

The idea of "elite bonds" may help assuage those concerns as Germany would only join up with other top-rated nations.

However, German Finance Ministry spokesman Johannes Blankenheim denied a Monday report in Die Welt daily that initial plans on issuing the joint bonds have already been drawn up as part of a wider package to be presented by Chancellor Angela Merkel and French President Nicolas Sarkozy at the next EU summit.

Blankenheim denied that such triple A bonds were among topics discussed last Friday when German Finance Minister Wolfgang Schaeuble hosted his counterparts from Finland and the Netherlands in Berlin. He insisted Berlin remains focused on instruments of long-term stability.

"We are working intensively on a stability union," Blankenheim said in a statement. "We want to secure this through changes to the treaties."

"That is the way to win back trust in the markets and the right signal to convince the world's financial investors that the euro is and remains a stable currency," Blankenheim said.

Meanwhile, Moody's warned in its report that the eurozone "is approaching a junction, leading either to closer integration or greater fragmentation."

After last week cutting its rating on Hungary to junk status, Moody's says more European sovereign borrowers risk falling to that level even in a positive scenario in which the eurozone doesn't split apart.

That's because Moody's considers that Europe's leaders may not agree on a comprehensive resolution to the crisis until "after a series of shocks" that block ever more EU members from access to financial markets.

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