According to the Financial Times, Italy’s finance minister Giulio Tremonti describes it as a “master solution” to the crisis, saying it would lower the cost of borrowing for states like his.
At the other end of the spectrum in terms of economic strength, Germany’s Chancellor Angela Merkel is said to be coming round to the idea of eurozone countries guaranteeing each other’s debt. However, Merkel does not want to formally see any structure that will merge its economy with those of less stable countries, ruling out her support for a eurobond.
The issue of a eurobond would help spread the debt burden across each of the region’s 17 members, with the better-off countries subsidising those worse-off in terms of their debt position. The stronger countries are arguing for fiscal and economic co-operation and greater eurozone governance first; the weaker ones want to spread their debt as soon as possible and are arguing strongly for the eurobond.
George Soros has also waded into the argument, pleading the case for the eurobond. In an article in today’s Financial Times, he writes: “The solution is obvious: deficit countries must be allowed to refinance their debt on the same terms as the surplus countries.
“This is best accomplished through eurobonds, which would be jointly guaranteed by all the member states.”
Eurobonds are still at their discussion phase and Germany and France will need to be convinced that they will suit their own needs as much as those of the rest of Europe. Merkel is in Paris tomorrow (16 Aug) where these discussions will continue with Nicolas Sarkozy, France’s president.
