Michael Noonan welcomes Francois Hollande's euro bonds proposal

Tuesday 22 May 2012 23.19
Michael Noonan said Ireland has been proposing euro bonds for a long time
Michael Noonan said Ireland has been proposing euro bonds for a long time

Minister for Finance Michael Noonan has said he does not expect agreement on euro bonds at tomorrow's EU summit.

However, Mr Noonan said it was good that the issue was on the agenda, and that Ireland had proposed it for a long time.

French President Francois Hollande will push a proposal for mutualising European debt at the informal summit of EU leaders in Brussels, increasing pressure on German Chancellor Angela Merkel to drop her opposition to the idea.

The new French leader raised the idea of bonds jointly underwritten by all eurozone member states during G8 talks at the weekend and intends to raise it again when EU leaders meet on 23 May, even if it goes against Ms Merkel's wishes.

"I will outline all growth proposals at this informal meeting," Mr Hollande told reporters at the end of the G8 talks in Camp David on Saturday, referring to tomorrow’s summit.

"Within this packet of proposals there will be euro bonds and I will not be alone in proposing them. I had confirmation on this at the G8."

He is expected to have firm backing from Italian Prime Minister Mario Monti, Spain's Mariano Rajoy and the European Commission, long a backer of euro bonds.

Slovak Prime Minister Robert Fico told his parliamentarians today he would support the French position.

Germany opposes any early move, saying more progress is needed on co-ordinating fiscal policies across the eurozone.

It has the backing of the Netherlands, Finland and other states.

The rapid deterioration in the eurozone debt crisis over the past month has brought the idea back to the forefront, with many economists and policymakers arguing it would be one of the best ways of restoring market confidence.

In a letter to EU leaders, European Council President Herman Van Rompuy urged them not to have any "taboos" at the summit, which is intended to focus on specific steps to stimulate growth and create jobs across the bloc.

"It is not too early to think ahead and to reflect on possible more fundamental changes," he wrote.

"In many ways, the perspective of moving towards a more integrated system would increase confidence in the euro and the European economy."

Ms Merkel has said she is not opposed to the principle of jointly underwritten euro area bonds, but believes it can only be discussed once there is much closer fiscal and economic integration across the eurozone.

That remains a long way off and German officials reiterated that point today.

"[Euro bonds are] the wrong prescription at the wrong time with the wrong side-effects," German Deputy Finance Minister Steffen Kampeter told German radio.

Obama calls for bank recapitalisation 

Meanwhile, US President Barack Obama has urged Europe to strengthen defences against financial market turmoil and recapitalise banks to help tackle the eurozone crisis.

Mr Obama's remarks suggested a four-point approach that would encompass financial, economic, fiscal and monetary measures.

"We've got to put in place firewalls that ensure that countries outside of Greece that are doing the right thing aren't harmed just because markets are skittish and nervous," Mr Obama said.

"We've got to make sure that banks are recapitalised in Europe so that investors have confidence.

“And we've got to make sure that there is a growth strategy to go alongside the need for fiscal discipline, as well as a monetary policy that is promoting the capacity of countries like a Spain or an Italy to put in place very tough targets and some very tough policies," Mr Obama said.

These measures would offer the people in the affected countries the prospect for economic growth, jobs and growing incomes, he said.