FRANCE WILL press Germany at a European summit this week to back jointly issued eurobonds in a drastic bid to assert control over the expanding debt crisis.
At his first EU meeting in Brussels, newly elected French president François Hollande will ask German chancellor Angela Merkel to withdraw her veto over eurobonds.
The proposal, supported by Ireland, is seen as a potential remedy to the debt debacle as it would provide a common euro zone guarantee to member states when they borrow on the open market.
This would ease the borrowing costs of distressed countries but increase those of strong countries such as Germany, which remains opposed to the notion.
However, the French leader believes the time has come to revisit eurobonds.
Amid questions over Greece’s membership of the euro and mounting pressure on Spain’s banks, his decision to push for a change comes as financial markets endure a renewed bout of turmoil.
At the G8 summit in Camp David at the weekend, Mr Hollande said he would present a wide-ranging plan to stimulate growth when he meets his European counterparts for an informal dinner on Wednesday night. “Within this package of proposals there will be eurobonds and I will not be alone in proposing them. I had confirmation on this at the G8,” he said.
In spite of German resistance, Mr Hollande has also pledged to reopen the fiscal treaty and empower the European Central Bank to lend directly to governments.
Ahead of the summit, EU leaders are keen to see whether he insists on the insertion of growth measures to the treaty or accepts an alternative that does not involve changing the pact.
Italian technocrat premier Mario Monti is also pushing for eurobonds, saying a concrete growth plan should include “an evolution toward eurobonds”.
In Dublin yesterday, Tánaiste Eamon Gilmore said he expected the talks on Wednesday to focus on growth measures to be advanced at a formal summit next month.
“One of those is the idea of eurobonds, a wider role for the European investment fund, a different approach perhaps to unused structural funds in the EU, a concentration on measures that are required to address youth unemployment in particular . . . and also measures that are required to provide more credit for small and medium-sized businesses,” Mr Gilmore said.
“The fact I think that there is a more receptive audience for those proposals is something that we very much welcome.”
However, the German position remains that eurobonds might be considered only as the end-point in the development of a fiscal union in which all countries adhere to rigorous financial discipline.
This is rooted in concern that any immediate move would play into the hands of fiscally weak governments which are reluctant to put their public finances on a sound footing.
“Without knowing precisely what Mr Hollande is going to say, I don’t see any change in the German position of the last two years,” said a German government source.
Although the source insisted Dr Merkel always sought to promote growth when confronting the debt emergency, Berlin is under pressure to redirect the response to the crisis away from austerity.
G8 leaders, the chancellor among them, wrapped up the Camp David talks with a declaration saying their imperative was to promote growth and jobs.
“There’s now an emerging consensus that more must be done to promote growth and job creation right now,” said US president Barack Obama.
In Brussels last Monday, Minister for Finance Michael Noonan complained to his euro zone counterparts about Greece’s failure to stick to its rescue plan.
German magazine Der Spiegel said Mr Noonan and his Portuguese counterpart Vitor Gaspar attacked Greece for “stoking up the fire”, saying this was unacceptable while they made huge efforts to fulfil their budget programmes.
A senior European official confirmed this account, saying Irish and Portuguese criticism of Greece was “factually correct”. The official described as “utterly black” the mood at the meeting, which was chaired by Luxembourg’s premier Jean-Claude Juncker.
“When Juncker opened the meeting there was a long 30 seconds of silence but once got stuck in they all gave it hot and heavy to the Greeks,” the official said.
Yesterday, Mr Gilmore said he expected a discussion at the summit on the ideas and proposals put forward by Ireland, which he hoped would be “taken forward and worked upon” in advance of the June summit where they would be considered formally.
