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Hollande draws first blood in eurobonds battle

24 may 2012, 11:20
French President Francois Hollande. ©AFP
French President Francois Hollande. ©AFP
French President Francois Hollande stepped up his crusade Thursday to convince eurozone nations to share debt between rich and poor despite resistance from Germany, AFP reports.

Boarding a train rather than a plane to attend his maiden EU summit, the socialist leader marked a clean break from the "Merkozy" years when his predecessor Nicolas Sarkozy was Chancellor Angela Merkel's closest ally.

Fighting Germany's insistence on budgetary discipline as the prime remedy to the debt crisis, Hollande quietly but firmly pushed for growth-oriented policies to re-balance austerity.

The freshly-elected Socialist leader came "floating ideas ... not coming to Brussels with a Kalashnikov", said a member of his entourage.

But after five hours of talks, Hollande said he wanted to see eurobonds -- pooled eurozone debt -- "written into the agenda" of the European Union as it went forward though Merkel disagreed.

Amid mounting worries over Greece's future in the eurozone and the fate of troubled Spanish banks, the game-changing notion won wide backing from his peers, according to Italian leader Mario Monti, who quoted "a majority" in favour.

As the 27-nation bloc prepares for major decisions on growth at an end-June summit, Hollande said eurobonds would enable countries "to access financing more easily on (money) markets".

This would allow governments to finance investments that could create jobs in the short-term and underpin economic growth down the line, while helping countries paying high borrowing costs.

Spain and Italy currently pay as much as five times more interest than Germany in issuing national bonds.

"A majority of countries said they were in favour of eurobonds, even those not in the eurozone, like Britain," said Monti, whose caretaker leadership of Italy piloting radical economic reforms has seen him emerge as a key EU powerbroker.

With stated support from the Netherlands, Finland and Sweden, Merkel said afterwards that there had been a "balanced" discussion on eurobonds, and that several participants expressed doubts about the benefits of unified eurozone interest rates.

Berlin fears eurobonds would only result in German taxpayers permanently underwriting the public finances of weaker eurozone economies.

She "explained the German position" and Hollande "said what he had already said previously, but there were broad differences", Merkel said.

EU president Herman Van Rompuy said the subject was "briefly touched upon" by several leaders "in the framework of deepening the monetary and economic union", but that no-one was seeking "immediate introduction".

He underlined: "We have to consider what the legal implications of all this are."

Others were less coy, the head of the Eurogroup of finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, saying "the debate on eurobonds is back on the table".

A European Commission source added that "the taboo surrounding eurobonds has been lifted", adding that Hollande "played his hand well... he knew not to push too far too fast".

Hollande, Merkel, Monti and Spanish Prime Minister Mariano Rajoy will meet in Rome before the June 28-29 summit, it was announced after a pre-summit report by Fitch Rating agency showed foreign investors fleeing Spanish and Italian debt in huge numbers.

Key issues going forward for Van Rompuy included "eurobonds in a time perspective, more integrated banking supervision and resolution, and a common deposit insurance scheme".

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