France's new president, Francois Hollande, believes he's found a solution to the euro crisis -- but others disagree
BRUSSELS – French President Francois Hollande thinks he’s found a solution to the euro zone crisis: the name’s Bonds. Euro bonds.
Unfortunately, Angela Merkel’s still playing Dr. No.
At a euro zone summit on Wednesday, the new French leader plans to revive proposals for bonds that would be jointly issued by euro zone countries to spread national debt burdens across the whole currency bloc.
Hollande knows however that there is little chance the German chancellor will warm to the idea, even faced with the mounting concern that, without drastic action, the euro zone is headed toward a disastrous breakup.
“We spoke about it and both sides confirmed their well-known positions,” said France’s Finance Minister Pierre Moscovici, after meeting with his German counterpart on Monday to prepare the summit.
“Francois Hollande plans to put everything on the table … even those proposals that cannot be agreed immediately,” Moscovici added.
As the euro zone’s strongest economy, Germany knows that euro bonds will mean its taxpayers end up taking on debts incurred by Greece, Spain, Italy and other troubled economies.
That would ease the immediate pain in the southern Europe and the risk of the euro’s early demise. But, critics argue, euro bonds would reward financial sloppiness and relax pressure on the southerners to purse the painful reforms and fiscal discipline needed to get their economies back in shape.
And if the euro bonds didn’t work, paying out for the south could undermine Germany’s financial stability.
“That’s a prescription that comes at the wrong time and carries the wrong side effects,” Germany’s Deputy Finance Minister Steffen Kampeter told Deutschlandfunk radio over the weekend.
He contended that common financing was unlikely to be in place for a decade or more, and certainly would not be decided when Hollande holds his first meeting with other euro zone leaders at Wednesday dinnertime summit in Brussels.
Hollande is expected to get support for euro bonds from the leaders of Spain, Italy and many smaller members of the 17-nation currency bloc, as well as the European Union’s head office which put forward a plan for jointly issued debt last year.
“It would make economic sense to create a deep, liquid and stable market for government bonds with the joint issuance of common debt — euro bonds — at least, once we have reinforced our economic governance further to ensure fiscal prudence,” EU Economics Commissioner Olli Rehn said at a speech in Oxford last week.
Even were the Germans to agree, the legal complexities involved in introducing jointly-issued debt would mean that euro bonds are years away. However, supporters say an agreement to work on their creation could help calm jittery markets and convince voters in Greece and Ireland to support European debt-fighting plans when they go to the polls in the coming weeks.
A “no” vote in Ireland’s May 31 referendum on the new EU fiscal discipline treaty could leave the country cut off from further European rescue funding. However polls show a significant number of voters, disgruntled with the austerity that came as a condition for a 67 billion euro bailout in 2010, are considering rejection.
Greece is holding a fresh election on June 17, six weeks after a nationwide vote produced political stalemate after a surge in support for parties on the far left and far right who oppose austerity measures attached to a 130 billion euro rescue plan.
Polls show most Greeks want to keep the euro, but they are deeply dissatisfied with mainstream politicians and what they view as foreign-imposed hardship.
Although other European leaders have lined up to say they want Greece to stay in the euro zone, the Greeks have been warned that could be impossible if they vote for parties that refuse to implement the bailout conditions.
“There is a choice: you can either vote to stay in the euro, with all the commitments you’ve made, or if you vote another way you’re effectively voting to leave,” British Prime Minister David Cameron told the Greeks Sunday on the sidelines of the NATO summit in Chicago.
Britain is outside the euro zone, but like other world leaders, Cameron is acutely aware of the potentially catastrophic impact a Greek exit could have on the global economy – through the risk it could also force out larger economies such as Spain and Italy, causing the collapse of the euro.
With that in mind, Wednesday’s meeting of euro zone presidents and prime ministers is expected to place new emphasis on pro-growth policies.
Merkel, Hollande and other leaders are working to find common ground on ideas such as frontloading EU funding lines to support job-creation projects in Greece and other hard hit nations, or leveraging up to 60 billion euros in funding from the EU’s investment bank.
Hollande wants a “growth pact” to complement the EU’s new fiscal discipline treaty, and there’s talk of easing austerity by giving countries like Spain, France and Italy more time to cut budget deficits.
The hope is that a more growth-friendly agenda and some signs of compromise from Merkel will produce an “Hollande-effect” on Greek voters, boosting mainstream parties who support the bailout and euro membership.
More Related Stories
- Top 5 investigative videos of the week: "Winning" Afghanistan
- Jester clowns Westboro Baptist Church
- GOP: Party of crybabies
- Developers evict historic women's shelter to build luxury hotel
- Guantánamo prisoner on hunger strike cries for help on Twitter
- 3 possible solutions to international tax avoidance
- “I just want the U.S. to send my father home”
- Army weapons engineer tied to white nationalist organizations
- Ted Cruz against the world
- David Vitter's hypocritical, punitive, horrible new amendment
- Louie Gohmert: Women should be forced to carry nonviable pregnancies to term
- Could hackers destroy the U.S. power grid?
- Democrats may be even worse than Republicans at regulating Wall Street
- Eric Holder versus journalism
- A progressive defense of drones
- There's no substitute for government disaster relief
- Holder signed off on search warrant for reporter
- Mississippi could begin prosecuting women for miscarriages
- Mike Judge: "Bowling for Columbine" made me pro-gun
- Closing Gitmo is not enough
- Murkowski: Palin too disengaged to run for Senate
Featured Slide Shows
The week in 10 picsclose X
- 1 of 11
Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
Credit: AP/LM Otero
Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
Credit: AP/Matt Rourke
A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
Credit: AP/Jenny Aicher
Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
Credit: AP/Molly Riley
Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
Credit: AP/J. Scott Applewhite
Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
Credit: AP/Carolyn Kaster
O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
Credit: AP/Las Vegas Review-Journal/Jeff Scheid
Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
Credit: AP/NASA/Chris Hadfield
When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
Credit: AP/Jacquelyn Martin
A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
Credit: AP/The Duluth News-Tribune/Clint Austin
Recent Slide Shows
- 1 of 11
Salon is proud to feature content from GlobalPost, an awarding-winning international news site that focuses on original reporting from journalists stationed around the world. GlobalPost combines traditional journalistic values with the power of new media to offer a fresh perspective on global developments.