Euro finance ministers try to avert crisis
BERLIN -- Finance ministers for the European Union were meeting Tuesday to talk about the once unthinkable idea of creating a European government bond to crawl out of a debt crisis even if major players have refused to sign on to the idea.
"We're actually really running out of money," said Bert Van Roosebeke, an economist with the Center for European Policy in Freiburg, Germany. "And politicians are starting to look for a new mechanism. Euro bonds are one of them."
German Chancellor Angela Merkel is fiercely opposing a pan-European bond in which the eurozone's wealthiest members like Germany and France would guarantee that the loans would be paid back.
The idea may work in theory now that it is clear that private investors will not buy the bonds of individual debtor nations without massive interest in return, experts say. The real obstacle is whether the idea can be sold to the citizens of the nations that would be on the hook for the so-called "elite bonds."
Merkel's party has been hammered in regional elections following her approval of deals to back rescue packages for Greece and Portugal, and on Tuesday she reiterated her position that a unified EU budget agency that would force spendthrift nations to cut spending is the answer to the debt crisis.
"Our priority is to have the entire eurozone placed on a stronger treaty basis," Merkel said in Berlin. "This is what we have devoted all of our efforts to and this is what I'm concentrating on in all of the talks with my counterparts."
That idea is also on the table in Brussels, where the finance ministers for the 17 eurozone nations that use the euro currency are meeting. That too is controversial. More closely integrating the eurozone which would mean member states ceding fiscal sovereignty to a central authority, as well as a split eurozone made up of the economically strongest members that would guarantee each other's loans - with tough fiscal requirements attached.
Germany, the eurozone's biggest and most fiscally sound economy, wants a change in Europe's treaties for a closer fiscal union as the price for guaranteeing the biggest share of emergency bailout funds to Greece, Ireland and Portugal. Merkel also wants to ensure the bloc never faces a repeat of the current situation again. Greece, with a debt level of 160% of GDP, is on the verge of bankruptcy, and the Italian budget is teetering. If Italy were to default on its debts of around $2.5 trillion, that could cause collapse in the eurozone and send shock waves throughout the global economy.
France's finance minister, Francois Baroin, said Tuesday that countries should integrate their budgets more closely and monitor one another's spending.
"We have to modify eurozone governance," Baroin said. "We definitely have to move toward more integrated budgetary consolidation, fiscal convergence with our neighbors."
Merkel has admitted that changing the treaties won't be easy because not all of the EU's 27 member states are on board. But she dismissed reports that the eurozone, or some nations within the bloc, might go ahead with a swifter treaty between governments.
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