Spain’s conservative government has added its voice to calls for deeper integration in the eurozone, suggesting to Brussels in a paper that members of the bloc should pool some aspects of their debt management and share a budget to fight crisis shocks.
German Chancellor Angela Merkel and France’s new President Emmanuel Macron agreed on Monday to outline a roadmap for deeper European Union integration and opened the door to changing the bloc’s treaties after meeting in Berlin.
France is also pushing for greater potential cooperation among the 19 countries that use the euro currency, in matters of budget, for instance.
The impetus comes after the EU was rocked by Britain’s decision to leave, prompting countries to take positions on how best to shore up unity in the bloc.
Spain’s proposals, which also include a common eurozone unemployment insurance scheme, were submitted to the European Commission in February but came to light this week and were released by the economy ministry on Tuesday (16 May).
Spain’s centre-right Prime Minister Mariano Rajoy (Partido Popular) has long called for further integration and repeatedly called for steps to complete a eurozone banking union, including by creating a deposit insurance scheme.
His government’s proposals go even further than those Germany and France have proposed, including saying that common debt management was a vital part of any fiscal union.
“Participating member states should allow for a certain degree of debt mutualisation,” the paper said. It later added: “The introduction of a euro area Treasury … and the possibility for common debt issuance could also be envisaged.”
The joint Eurobond idea has been shunned by Germany amid concerns it would have to bankroll others, and Macron has said he did not favour mutualising debt.
Rajoy had already pushed for jointly issued Eurobonds in 2012, at a time when his government was trying to steer Spain through one of its deepest ever recessions and had to request a European bailout for the country’s weakest banks.
Spain, the eurozone’s fourth-largest economy, has since recovered to become one of the fastest-growing in the bloc.
Madrid’s latest proposals also included a common “rainy day fund” for the eurozone that could used to counter shocks and support investment.
Eurobonds refer to the possibility of mutualising debt among the 17 countries in the euro area as a way of bringing down the borrowing costs of weaker states.
The idea resurfaced as the financial and economic crisis started hitting Europe in 2008. With many countries forced to pay unsustainable yields to refinance their public debt, the concept of low-yield Eurobonds sounded appealing to a growing field of investors and economists who argued it would be the best – and perhaps only – way of solving the debt crisis.
France, Italy and Spain have backed the idea, as well as the European Commission, which has long been a backer of euro area bonds.
But Eurobonds are strongly opposed by Germany, which pays low yields on its public debt and fears being forced to pay more to issue a eurozone security.
Berlin has not ruled out eurozone bonds entirely but sees it only as a long-term prospect that can take place if Europe takes more steps towards a tighter political and fiscal union, which remains a long way off.
In November 2011, the European Commission presented a Green Paper on the feasibility of Eurobonds listing three options ranging from the ambitious full replacement of national bonds with eurobonds to a less drastic partial substitution without joint guarantees.
- Spanish Ministry of Economy, Industry and Competitiveness: Spanish position on the future of Europe (February 2017)