03/02/2012 Euro bonds and treaties on the agenda for the European Parliaments ‘mini-session’
On the 1st and 2nd of February, Euro-deputies will have a mini plenary session in Brussels, during which they will deal with the issue of the creation of euro-bonds and the results of the European Council on 30 January.
Embargo on Iranian oil and draft treaties
On Wednesday the Euro-deputies will discuss the Iranian nuclear project with the High Representative for foreign affairs Catherine Ashton, as well as the recent European embargo on Iranian oil, which will lead to a vote on a resolution the day after. The meeting will also be an opportunity to discuss the situation in Russia. A resolution on Russia will be voted on during the next plenary session.
Deputies will be reacting to the results of the European Council that took place on 30 January in Brussels. A resolution will be voted on Thursday. During the summit the heads of state and government should approve two draft treaties that seek to address the two main causes of the crisis in the Euro zone. On the one hand, the treaty on stability, coordination and governance of the economic and monetary union will apply to the 26 states that will sign it. But on the other hand there is the European Stability Mechanism (ESM), the text of which was approved on 23 January by European ministers for Finance. During the European Council the 27 must decide on the participation of non Euro-zone countries, which will have signed the treaty, at future Euro zone summits.
Eurobonds, a solution to the crisis?
On Thursday Euro-deputies will look at the feasibility of Eurobonds. According to the Commission for Economic Affairs, these euro-bonds could, in the mid-term, ensure the stability of the Euro zone, but they do not respond to short term needs.
The idea of issuing common bonds in the Euro zone was raised in 2010 as part of a solution to the debt crisis within the euro zone. This idea was later taken up by various different economic and political actors. The European Commission then published a green paper in November 2011 on the feasibility of the issuing of these stability bonds.
Currently the issuing of sovereign bonds in the Euro zone is carried out in a decentralised way by member states themselves. The creation of Euro bonds would allow for the creation of financial solidarity between member countries of the euro zone. In this way the most fragile countries could benefit from the solidarity of others.
However they would also be held to very specific commitments with regard to public finances as Oli Rehn, Commissioner for Economic affairs states: ‘any kind of euro-bonds should also come with a strengthening of budgetary control and the coordination of policies as essential compensation.’
In this way countries that issue bonds with high yields, like Italy or Spain, could benefit from the lower interest rates that stronger countries like Germany enjoy, if they strengthen their commitment to budgetary discipline in the long term.
For the German chancellor Angela Merkel, as the financial and economic situation of the Euro zone countries are so disparate, the pooling of European debt is not feasible. However, the director general of the IMF Christine Lagarde is in favour of the issuing of Eurobonds.