Y ARE SOME LEADERS CALLING FOR EUROZONE BONDS?
A. Leaders in Luxembourg and Italy have called on the Eurozone to issue joint bonds in order to stop the euro crisis in its tracks and signal the political commitment to the single currency. They see fusing the Eurozone’s debt markets as a way to combat the punitive bond markets.
Q.WHAT ARE THE LEGAL BARRIERS TO EURO BONDS?
A. Recent treaties do give the European Commission power to issue joint bonds in cases of emergency, but there is no reference to the creation of permanent euro-bonds for everyday sovereign funding. German chancellor Angela Merkel has said that current EU treaties don’t allow for single Eurozone bonds.
Q.WHAT ARE THE POLITICAL BARRIERS?
A. The Netherlands, Germany and Austria are all firmly opposed to the idea. It is likely to be a political hot potato domestically because it would involve more fiscally disciplined states paying more while more indebted countries would pay less, on top of having to pay for international bailouts. It would also require governments to surrender further powers over their budgets to Eurozone governance because countries with large deficits would raise the cost of borrowing for everyone else.