Eurobonds and a European Stability Agency are the GPS that the eurozone ship desperately needs

Date

13 Dec 2010

Sections

Euro & Finance

Press release

Joint Press Statement by Poul Nyrup Rasmussen, President of the Party of European Socialists (PES) and Martin Schulz, President of the Socialists and Democrats Group (S&D) in the European Parliament.

The eurozone ship is adrift. Conservative prevarication in 2010 has left the European project perilously close to the rocks. It is time for action rather than more ambiguous double speak from the German Chancellor and the French President. Their mixed messages over the last 7 days on Eurobonds and Fiscal EU issues have created yet more divisions for market speculators to exploit.

The PES and S&D Group has a clear set of proposals to ensure that, in 2011, the EU can embark on a  journey towards genuine macro-economic coordination.

·         We cannot solve the eurozone debt crisis by contracting more debt. What we can do is to transform debt, in turning a given ratio of national borrowing into Eurobonds. In doing so, we will replace unsustainable, unprotected national debt by stable, safe and sound collective borrowing.

·         Eurobonds are nothing more than an application of the “unity is strength” principle. Europe standing together is stronger than the sum of its member states. In this battle against international financial market, there is no possible answer at national level.

·         Eurobonds, in extending the eurozone economic power to the markets, are guaranteed the highest possible credit rating and the lowest interest rates. Because every eurozone member states, including Germany, currently experience sharp increases in borrowing costs, every member state will gain from Eurobonds.

·         The eurozone is a ship with no-one at the helm. Markets know that they have everything to gain from attacking the eurozone, because they know that there is no credible coordination. This is why designing the right instruments is only part of the answer. We need strong institutions, too.

Eurozone member states have done half of the job a decade ago, when setting up the European Central Bank. But the euro still lacks a fiscal and political pillar to balance the already existing monetary pillar. We must set up a European Stability Agency, to manage Eurobonds, and thus part of the public debt in the eurozone. This will be the first step towards closing the gap between monetary and fiscal pillars in the eurozone. It is about closing the economic credibility gap that has left individual member states of the eurozone so exposed to market attacks.

We call on the European Council of 16-17 December to adopt our strategy for a genuine European recovery, and to avoid missing yet another opportunity to finally get ahead of this crisis and act rather than react.

-ends-

For further information please contact Brian Synnott (PES media adviser) on +32 474 98 96 75 (brian.synnott@pes.org)

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