German Chancellor Angela Merkel on Wednesday reiterated her firm opposition to pooling eurozone debts by issuing common bonds, and urged fellow eurozone members not to expect a quick and easy solution to the lingering debt crisis.
Addressing the lower house of German parliament, or the Bundestag, Merkel stressed Germany's participation in issuing such collective debt bonds was against the country's constitution. She insisted that the idea of eurobonds were economically "wrong and counterproductive."
Merkel insisted that sharing of debt liabilities among eurozone members would be possible only after the establishment of a truly fiscal and political union that allows the EU to control and monitor budget plans of member nations. She noted: "Joint liability can only happen when sufficient controls are in place."
Stating that Germany must not be seen by fellow eurozone states as an unlimited financial source for resolving the crisis, Merkel stressed: "It is imperative that we don't promise things that we cannot deliver."
In her parliamentary address made on the eve of the summit of European leaders in Brussels, Merkel stressed that issuing common debt bonds was the "wrong way" of dealing with the crisis, and said pursuing the idea would mean "working to breach the vicious circle of piling up debt and breaking [EU] rules."
"I fear that at the summit we will talk too much about all these ideas for joint liability and too little about improved controls and structural measures," Merkel said. She believes stronger competitiveness coupled with EU's ability to control and monitor national budgets and debts would promote sustained growth.
Discussions on various ways to tackle the ongoing debt crisis in the eurozone, including Eurobonds, demands by Greece to renegotiate the terms of its bailout, Eurozone banking union and a growth pact, are likely to dominate the two-day summit of EU leaders due to begin in Brussels on Thursday.
A day earlier, European Union authorities had unveiled a report containing proposals for securing the stability of the Union by enforcing tighter fiscal integration with budget controls across the eurozone and establishing a European banking union. The proposed measures enhances the existing power of European Union in Brussels over the fiscal policies of the eurozone member-states.
The report urges member-states to consider issuing collective bonds by all eurozone member states to keep borrowing costs down for nations currently facing unaffordable debt as part of a 10-year plan aimed at closer fiscal integration. The idea has the backing of France, Italy and Spain, the three large eurozone economies after Germany.
Earlier on Wednesday, Spanish Prime Minister Mariano Rajoy warned that his country will not be able to finance itself for long at the high rates it currently pays for raising funds from the markets, and urged the European Union to move quickly to bring the rates to sustainable levels.
Rajoy's remarks came as Spanish government's 10-year bonds yields surged almost 7 percent, which is seen as unsustainable by analysts. Incidentally, Italy's borrowing costs also jumped on Wednesday amidst growing concerns whether the country would be next in line to seek a bailout.
On Monday, Spain and Cyprus made formal requests for financial assistance from the European Union to shore up their ailing banking sector. Fellow eurozone nations like Greece, Ireland and Portugal have already availed such loans provided by the EU, ECB and IMF in exchange for implementing stringent austerity measures.
by RTT Staff Writer
For comments and feedback: email@example.com