Countries in favour of eurobonds should be open about how such financial instruments would effectively encroach on their fiscal sovereignty, the president of the Bundesbank said on Friday.
“The pooling of debt is just one side of a coin where federalism is the other. Governments who are in favour (of eurobonds) fail to point this out,” German central bank head Jens Weidmann told the French daily Le Monde in an interview.
“In those countries which are calling for eurobonds, France included, there is no public debate or public support for the transfer of sovereignty that that would entail. But it's precisely this debate we should be having,” Weidmann said.
France's new President Francois Hollande is spearheading a drive for eurobonds, in effect pooling the debt of eurozone countries, in order to raise fresh debt funding.
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.
In contrast, France and some other eurozone states say that eurobonds could fund desperately needed growth policies after years of austerity have pushed the economy into recession.
“It is illusory to believe that eurobonds would resolve the current crisis,” Weidmann continued.
Common bonds “can only come at the end of a long process, which, among others, would require several states to change their constitution, modification of treaties and the creation of more of a budgetary union,” he said.
“You don't give your credit card to someone who can't keep their spending under control,” Weidmann added. - Sapa-AFP