Finance ministers from the eurozone are meeting to try to resolve a solution to protecting the currency
The 17 finance ministers of the eurozone hve converged on EU
headquarters in a desperate bid to save the currency - and to protect
the global economy from a debt-induced financial tsunami.
They
discussed ideas that would have been taboo only recently, before things
got so bad: countries ceding fiscal sovereignty to a central authority;
some kind of elite group of euro nations that would guarantee one
another's loans - but require strong fiscal discipline from anyone
wanting membership.
The fear is that the crisis - which has already forced bailouts of
Greece, Ireland and Portugal - could engulf bigger economies such as
Italy, the eurozone's third-largest. If Italy were to default on its
debt the fallout could spell ruin for the euro project itself and send
shockwaves throughout the global economy.
In a reminder of the urgency, Italy's borrowing rates shot up to
rates above 7%, an unsustainable level on a par with rates that forced
the others to seek bailouts.
At the top of the agenda is finding a means to more fully integrate
the eurozone's disparate nations - ranging from powerful Germany to tiny
Malta - both politically and financially. And the ministers must do it
fast, without the delays caused by democratic niceties like referendums
that have led many EU reforms to take years to implement.
France's finance minister, Francois Baroin, said that countries
should integrate their budgets more closely and monitor one another's
spending.
He said France and Germany - which have largely been calling the
shots on efforts to overcome the crisis - will make proposals on how
eurozone countries can monitor one another under such a new system.
The 17 ministers are expected to discuss jointly issuing so-called
eurobonds - an all-for-one, one-for-all way of having the different
countries guarantee one another's debts. Right now each nation issues
its own bonds, meaning that while Italy pays above 7%, Germany pays
about 2%.
Having stronger countries like Germany stand behind the general
European debt would lower Italy's borrowing rates - and perhaps avoid a
debt spiral that leads to a national bankruptcy. At the same time, it
would raise Germany's cost of borrowing, and that is why Germany has
been fiercely opposed to the eurobond proposal.
Proponents of elite bonds say the proceeds could be used to help the
eurozone's weaker countries deal with their debts, in return for strict
conditions being imposed on their budgets. Critics argue that further
fragmenting the eurozone into strong countries and weak countries would
benefit no one.
Press Association
