Merkel rejects sharing eurozone debt through bonds

Francois Hollande and Angela Merkel in Paris, 27 June Francois Hollande and Angela Merkel have differing views on debt management

German Chancellor Angela Merkel has again rejected the idea of pooling eurozone debt through bonds and urged greater competitiveness in the EU.

She told parliament in Berlin that the proposal for "eurobonds" went against Germany's constitution.

Mrs Merkel later travelled to Paris for talks with President Francois Hollande.

In a gesture to Mr Hollande, who holds opposing views on debt, she said she hoped European leaders would adopt a 130bn-euro ($162bn) stimulus package.

Mr Hollande, who became French president on a ticket of anti-austerity, has been a strong supporter of the growth package.

Mrs Merkel said: "We have made progress toward a pact for growth, which we hope can be decided tomorrow."

The pair head to Brussels on Thursday for a two-day summit of European Union leaders regarded as crucial in tackling a growing economic crisis.

European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets.

The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems.

Spanish Prime Minister Mariano Rajoy said on Wednesday that his country could not afford to finance itself for long at current bond rates.

Spanish 10-year government bonds have been trading at yields above 6.8%, coming close to the 7% considered unaffordable.

'Vicious circle'

Several EU leaders want individual countries' debts guaranteed by the whole eurozone, for instance in the form of centrally issued eurobonds.

A mannequin of German Chancellor Angela Merkel stands outside her offices in Berlin, 27 June Protesters parked a mannequin of Angela Merkel outside her offices in Berlin

But Mrs Merkel told parliament that eurobonds were "the wrong way" and "counter-productive", adding: "We are working to breach the vicious circle of piling up debt and breaking [EU] rules."

She said to loud applause: "It is imperative that we don't promise things that we cannot deliver. Joint liability can only happen when sufficient controls are in place."

Stronger competitiveness was the condition for sustained growth, the chancellor said.

Mr Hollande believes eurobonds should be a eurozone priority for helping countries like Italy and Spain bring their borrowing costs down.

But Mrs Merkel continues to insist that before anything is done to increase the burden on German taxpayers, building blocks towards greater fiscal, banking and, eventually, political union must be put in place.

Calls for more immediate action are growing louder by the day, the BBC's Chris Morris says.

The fear is that the markets will react very badly to another fudged summit, he adds.

More on This Story

More Europe stories

RSS

Features

  • NS Savannah, 1962Nuclear dream

    The ship that totally failed to change the world


  • Espresso cup7 days quiz

    Which city serves the strongest cup of coffee?


  • Glasgow 2014 quaichs and medalsQuaich guide

    What do the Scottish gifts given to Games medallists symbolise?


  • Malaysian plane wreckage in UkraineFlight risk

    How odd is it for three planes to crash in eight days?


  • israel flagDos and don'ts

    Can you criticise Israel without being anti-Semitic?


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.