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France to push for eurobonds in Brussels

AFP · 21 Jun 2012, 08:53

Published: 21 Jun 2012 08:53 GMT+02:00

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Germany and France will overcome their differences and agree on solutions to the current crisis at the upcoming EU summit, French Prime Minister Jean-Marc Ayrault said in an interview Wednesday.

"I have no doubt that we will come to an agreement at the European summit in Brussels," Ayrault told the German weekly Die Zeit in a pre-release of an interview to be published on Thursday.

"The governments know what is at stake. We have to ensure Europe's financial stability and press ahead with our efforts to bring down debt and deficits," he said.

"And we now have to take the road that leads to growth and jobs."

There has been tension between Berlin and Paris over the way out of the long-running debt crisis, with German Chancellor Angela Merkel insisting that austerity is the way forward, while French President Francois Hollande sees kick-starting growth as paramount.

Paris has also been spearheading a campaign for common EU bonds or so-called eurobonds, effectively the pooling of debt of eurozone member states to drive down borrowing costs.

France and other eurozone states argue eurobonds could fund desperately needed growth policies after years of austerity have pushed some of their economies into recession.

But Germany is firmly opposed to such a move, arguing it takes away the pressure for reform in spendthrift countries and also undermines market discipline.

Berlin insists that a true fiscal union is needed first, with member states surrendering fiscal sovereignty, before eurobonds can be created.

"I want eurobonds to be discussed in Brussels," Ayrault told Die Zeit.

"But it's true that mutualisation of debt would necessarily entail deeper political integration and that will certainly take several years. But we shouldn't wait until then to act. Time is pressing," the French premier insisted.

Ayrault said it was "essential that this summit makes the decisions that will win back people's confidence and offer a perspective for the European project.

Story continues below…

"The answer so far has always been 'austerity'. That is why doubts about the European project have arisen in every one of our countries, even in Germany," he said.

A banking union was needed, with a single EU supervisory banking authority and a common deposit guarantee scheme, Ayrault argued.

Ways could also be found to make it easier for states to access financing, such as short-term bonds, or a recent suggestion for a debt redemption fund.  

And the region's incoming bailout fund, the European Stability Mechanism should be able, under certain circumstances, to function as a bank and borrow money directly from the European Central Bank, Ayrault said, a proposal to which Germany is also opposed.

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