“STABILITY bonds” backed by the Eurozone as a whole could be one solution to the sovereign debt crises, European Commission (EC) president Jose Manuel Barroso said yesterday.
Such a commitment from member states would show that “we are serious about stronger governance in the euro area, both in discipline and in convergence”, he said.
German Chancellor Angela Merkel fears such bonds would allow weak countries to “free-ride” on Germany’s fiscal strength.
With Germany essentially guaranteeing other countries’ debts, the eurobonds could allow them to avoid the much-needed economic reforms which would put their economies on a more competitive longer-term footing.
However, Barroso tried to calm such worries, saying “stability bonds will not solve our immediate problems and cannot replace the reforms that are needed in countries currently under pressure.”
Barroso also called on euro governments to present draft budgets to the Commission by mid-October each year.
The process would allow the EC to closely monitor members’ finances, “so that we do not face the situation where failing in one country endangers the stability of the Eurozone.”