European Commission President Jose Barroso said he is close to proposing options on joint euro-area bond sales, putting officials in Brussels on a collision course with Germany over steps to contain the debt crisis.
“The commission will soon present options for the introduction of euro bonds,” Barroso told the European Parliament in Strasbourg, France, today, prompting applause from lawmakers who have backed the idea. “Some of these options could be implemented within the terms of the current treaty; others would require treaty change.”
The idea of bonds sold jointly by the euro area’s 17 nations remains alive because unprecedented bailouts by governments and the European Central Bank have failed to stamp out debt concerns that began in Greece almost two years ago and rattled markets in AAA rated France last month.
The disagreement over collective debt guarantees underscores the worries of policy makers outside Europe over euro leaders’ inability to solve the crisis. U.S. Treasury Secretary Timothy F. Geithner will travel to a meeting of European Union finance ministers in Poland this week to urge them to step up their efforts amid Obama administration concerns that the region’s woes may hurt the U.S. economy.
European authorities “need to do whatever they can do to calm these pressures,” Geithner told Bloomberg Television Sept. 9. “They have to demonstrate they have enough political will.”
The commission said in August that it may present draft legislation on euro bonds when completing a report on the feasibility of common debt sales. The commission opposed such a step earlier this year because of German-led objections.
“We all feel a yearning that there might be one buzzword that solves the problem we have in the euro area, in other words the debt crisis, whether it’s euro bonds, insolvency or other words,” German Chancellor Angela Merkel said yesterday. “That won’t happen. I’m deeply convinced of that. Rather, it will be a very long, step-by-step process.”
In France, spokeswoman Valerie Pecresse today restated her government’s concerns. “Mutualization of debt is an arrival point, not a departure point,” she told reporters in Paris. She said euro bonds “would be the final stage of a process of convergence. Right now there’s a consensus that the step to take is repairing public finances.”
EU Economic and Monetary Affairs Commissioner Olli Rehn said in July that the feasibility study on common bond issuance would be ready “toward the end of the year.”
“We must be honest: this will not bring an immediate solution for all the problems we face,” Barroso said today.
He also called Greece’s latest budget-austerity measures “significant.”
The Greek government decided on Sept. 11 to cut one month’s wages from all elected officials and impose an annual charge on all property for two years in a bid to qualify for another installment of international aid. The aim is to meet 2011 and 2012 targets for narrowing the budget deficit and to cover a shortfall for this year that has been exacerbated by a deepening recession, according to Finance Minister Evangelos Venizelos.
“The Greek government has taken significant steps,” Barroso said. “I urge Greece to finalize these efforts.”
Greece is seeking this month to win a sixth tranche of loans under last year’s 110 billion-euro ($150 billion) aid package from the euro area and International Monetary Fund and to avoid a default. Prime Minister George Papandreou’s government also wants to benefit from a planned second aid package of 159 billion euros approved by euro-area leaders on July 21.
“What we need now is Greece to fully carry out its reform program,” Barroso said.