16 Aug 2011

Eurobonds opposed by Germany and France

1:43 pm on 16 August 2011

European business groups are calling for eurobonds to be issued, despite opposition from Germany and France.

Most experts say the latest measures will only buy some time whereas a common bond isse could solve the euro zone's debt problems by allowing all its members to borrow at affordable rates.

But eurobonds are opposed by Germany, because they may increase German borrowing costs and reduce incentives for weaker euro zone members like Greece to reform their economies.

However, investor George Soros says there could be big trouble ahead without it.

Meanwhile, the European Central Bank spent 22 billion euros buying Spanish and Italian bonds on Monday, to try to halt the spread of the debt crisis in Europe.

President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany are due to meet in Paris on Tuesday.

Deutsche Welle Radio reports that both governments say eurobonds will not be on the agenda at the meeting.

Germany Finance Minister Wolfgang Schauble told Der Spiegel magazine that there would be ''no sharing of debts and not an infinite amount of aid (available)''.

Deutsche Welle Radio reports the government has confirmed this view.

'''The German government does not consider it worthwhile talking about eurobonds at the present time,'' said spokesman Steffen Seibert.

He added that Germany does not believe this is the ''right way'' to solve the eurozone crisis.

Meanwhile, World Bank chief Robert Zoellick on Sunday warned that the eurozone's sovereign debt issues ''could turn out to be the most important'' challenge facing the world economy.

''We are in the early moments of a new and different storm. It's not the same as 2008,'' he said in an interview with the Weekend Australian newspaper.