Euro-Area Debt Sharing Requires More Budget Oversight, Rehn SaysJonathan Stearns
European Union Economic and Monetary Affairs Commissioner Olli Rehn said any joint bond sales by euro-area governments to curb borrowing costs must await stricter EU oversight of national budgets and more support in countries such as Germany.
Rehn’s comments highlight the thinking that led EU President Herman Van Rompuy in December to drop proposals for so-called euro bonds or a European debt-redemption fund from a roadmap for an overhaul of the crisis-hit euro area.
“Further reinforced economic governance is necessary,” Rehn told the European Parliament today in Strasbourg, France. “This should involve enhanced budgetary surveillance and further sharing of fiscal sovereignty.”
German Chancellor Angela Merkel, seeking re-election this year, has fought off calls by distressed governments in southern Europe and by the EU Parliament for further sovereign-debt sharing following the euro area’s creation since 2010 of European rescue funds able to sell bonds to finance aid packages. So far, five euro nations -- Greece, Ireland, Portugal, Spain and Cyprus -- have requested financial rescues.
“The guiding principle remains: there can be no further mutualization without deeper integration,” Rehn said.
He said governments and voters in AAA rated euro nations including Germany and the Netherlands need to be persuaded of euro bonds’ benefits, which he said could be “the stabilization of sovereign-debt markets and the creation of a new, deep and liquid bond market.”
“Any progress or roadmap toward common issuance must obviously build on broad political acceptance and support by all participating governments and by the civil society at large,” Rehn said. “Therefore, much more work would need to be done to credibly and convincingly address the concerns of those governments and parts of the civil society that are currently not yet convinced of common debt issuance and its merits.”