MARKETS rallied yesterday after European Commission president Jose Manuel Barroso promised to unveil new proposals for euro-bonds in the near future.
Speaking to the European Parliament, he said: “This is a fight for the economic and political future of Europe. This is a fight for European integration itself.”
A euro-bond would effectively see paymaster economies agree to underwrite the debts of weaker countries.
In the evening the region’s leaders tried to affirm their support for Greece’s membership of the euro.
Following a conference call between Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel, Athens released a statement that said: “Greece is an integral part of the Eurozone... Greece is determined to meet all its commitments to its partners.”
Merkel had previously warned that politicians must weigh their words “carefully”, a slap-down to her coalition partner who has talked publicly about preparing for a Greek default.
There were reports that the EU is preparing for disaster behind the scenes. A leaked document written by EU officials was quoted as saying that over the summer, “contagion has spread across markets and countries and the crisis has become systemic”.
And the statement is unlikely to impress markets. Yesterday morning Newedge’s Bill Blain warned against further “euro elite platitudes”, saying: “We don’t need more circular chitter-chatter, plans about plans, or panic about electoral implications… We have reached the ‘do something’ moment.”
That moment could still be far off, however: despite the Eurostoxx 50 and the FTSE 100 both closing up, stocks dipped during the day after an Austrian parliamentary committee refused to fast-track a vote on expanding Europe’s bailout facility.
The current schedule could see the region wait until December to fully ratify Greece’s second bailout. But at the moment, markets are more concerned about Athens staying on track with its austerity targets to continue receiving instalments of its first bailout.