Debt sharing comes with strings attached, Brussels report states

City A.M. Reporter
EUROPEAN Council chief Herman Van Rompuy yesterday released a fresh plan for closer integration, involving eurobonds as the final stage of a fiscal union.

“In a medium-term perspective, the issuance of common debt could be explored as an element of such a fiscal union and subject to progress on fiscal integration,” the report said, warning that debt sharing measures must be conditional on moves towards a closer union.

“Steps towards the introduction of joint and several sovereign liabilities could be considered, as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance,” it said.

The report was also prepared by European Commission president Jose Manuel Barroso, European Central Bank president Mario Draghi and president of the Eurogroup, Jean-Claude Juncker.

The report recommends that the Eurozone should push ahead with a banking union, a budgetary union, joint economic policy framework and to ensure all this has democratic support. To make joint debt issuance possible, Brussels should be able to set annual deficit and limits for individual members, it said.