Angela Merkel and Nicolas Sarkozy were opposed to the creation of Eurobonds, though presented as an anti-crisis. Explanations. German Chancellor Angela Merkel and French President Nicolas Sarkozy during a press conférecne at the Elysee Palace August 16, 2011.
Until the last moment, the markets have hoped that the magic word is uttered on Tuesday night at the mini-summit between German Chancellor and French President. Las. The Eurobonds, the European bonds, which could present a solution to the debt crisis, are still not on the agenda. Nicolas Sarkozy and Angela Merkel will remain strongly opposed, while the debate is growing in Europe. Result, stock markets go down, disappointed by the weakness of the Franco-European.
The Eurobonds, what is it?
These are bonds issued in Europe.To avoid the sharp disagreement between interest rate bonds issued by different states in the euro area, it could issue its own securities markets. The rate is an average for that individual member countries are financed. This system would in some way to centralize the refinancing of the member countries of the euro area via a new product under the guarantee of the 17 member states.
How do they present a solution to the debt crisis?
Because of the doubts hanging over the strength of the European economy, some countries are now unable to obtain financing in the markets on acceptable terms. Obligations stamped with European countries, like Greece, Ireland, Spain and Italy, could be financed under much better conditions.If that is increasingly demanded by the markets, because they fear that, like Greece, other countries have their notes soon spoiled by the rating agencies. The risks of bankruptcy then cause a domino effect on all countries in the euro area, which would directly threaten the survival of the single currency. Currently, the European Financial Stability Fund (EFSF), created in 2010 by members of the EU, is a kind of substitute for Eurobonds, because through him all states provide for the repayment of debts to 440 billion European euros.Some states want it to reach 1,000 billion euros, but Paris and Berlin are opposed.
Why France and Germany do not want Eurobonds?
The idea of a Eurobond is not new, but it has always encountered opposition from Berlin, as the best student in the euro area does not put out the fires for the last class. In fact, mechanically Eurobonds would increase the cost of credit rated countries such as Germany. Today a 10-year bond issued by Germany costs the country an interest of approximately 2.3% when the same bond issued by Greece is an interest of 15.26%.According to recent estimates of the famous German Ifo institute, the additional cost of Eurobonds for the German budget and would amount to 47 billion euros per year.
In addition, Paris and Berlin are concerned that these obligations could discourage European countries most low scores, like Greece to undertake needed economic reforms, that is to say the drastic reduction of their budget. But the reason most sensitive is primarily political: the creation of Eurobonds involve a scrutiny of the European Union on national budgets. Understand, a lot further economic federalism. Before discussing the sharing of debt, we must consider the budget and tax harmonization, particularly explains Nicolas Sarkozy's entourage.Ireland, for example, maintains a more advantageous tax system to attract companies.
However, in recent days some reluctance in Germany begin to break. For the first time Tuesday, members of the CDU party of German Chancellor Angela Merkjel lifted the taboo of Eurobonds, while the debate is growing in the country. "It does no good to see things in black and white. (…) I do not think (Eurobonds) be an instrument of the devil," said MP notably Johann Wadephul CDU at Handelsblatt in a statement. Last Sunday, the conservative daily Die Welt, which said that Berlin "does more, ultimately, a transfer of funds to government bonds in common."The maintenance of the euro area as a priority for Germany.
Who is in favor?
In France, the PS is favorable long, Francois Hollande has even made some of his presidential program. On Wednesday the former Prime Minister Laurent Fabius has also expressed its "disappointment" considering that Nicolas Sarkozy had made a "major mistake" by ignoring the common obligations. In fact, the left parties of different countries are generally more favorable to this system, like the German Social Democratic Party (SPD), which argues for months to create and eurobonds in return for a increased scrutiny of Europe on national budgets. In recent days new voices have emerged in the debate, such as Italy, whose economy minister said this weekend be conducive to the solution of Eurobonds.The Spanish Minister of Economy Elena Salgado for its view that the "Eurobonds" were "good idea" that can make its way, but is "not on the agenda," some countries such as Spain to "make change" to appease the "reluctance" in Germany. Side markets, many investors see the birth of Eurobonds responding adequately to the attacks on weaker nations in the euro area.