EU Economics Commission Olli Rehn announced yesterday (22 June) in the European Parliament that Brussels was planning to present a report on Eurobonds which could be accompanied "by legislative proposals" on common eurozone securities. The move is seen as a tactical step to win the Parliament's support for other economic governance dossiers.
In an unprecedented move, Rehn said that the Commission would present a report "on the setting up of a system of common issuance of European sovereign bonds," calling them "eurosecurities".
"These eurosecurities would aim to strengthen fiscal discipline and increase stability in the euro area through markets," Rehn added.
Indeed, widening spreads between the German Bund and the securities of weaker and more indebted eurozone economies would soon become a distant memory if common bonds were issued jointly by eurozone countries.
Who pays the most?
However, the bloc's most virtuous members, particularly Germany, risk paying more to refinance their debt by joining less stable economies in issuing bonds. But Rehn tried to quell Berlin's concerns: the proposal on Eurobonds would in fact make sure that "member states enjoying the highest credit standards would not suffer from higher interest rates," he argued.
This would be made possible by the increased liquidity resulting from issuing Eurobonds.
"The report will, if appropriate, be accompanied by legislative proposals," said Rehn, proposing for the first time legislative intervention on the controversial issue.
A hook for the Parliament
Although Rehn's announcement represents an unprecedented step in favour of Eurobonds, the context in which it was made is open to interpretation.
Rehn linked the publication of the Eurobonds report to the entry into force of a regulation on enforcing budgetary surveillance. The report will be presented "within six months" of applying the new rules, the Finnish commissioner promised.
The regulation is part of a wider legislative package on economic governance which is currently being held up by a dispute between the Parliament and the Council over the majority required to launch an excessive deficit procedure. The Parliament wants to stick to the Commission's original proposal, which envisages a qualified majority in the Council to block such a procedure. Member states instead want a qualified majority to approve it.
Given the resoluteness of some member states on this point, Brussels is trying to convince MEPs to give up. Rehn yesterday called on the Parliament to go "the last centimetre for reinforced economic governance".
The offer on Eurobonds, which have been backed by MEPs for months, could represent a tactical move to win support on other dossiers.
"The usual political hurdles remain unchanged," a Commission source told EURACTIV, playing down the relevance of Rehn's announcement. Germany is still far from convinced of the usefulness of Eurobonds.
Moreover, the only candidate for the presidency of the European Central Bank, Mario Draghi, dismissed the idea a few weeks ago. Eurobonds "would introduce an implicit subsidy from fiscally sound to fiscally less sound member states," he argued, answering questions from MEPs.
"This might unduly reward unsound policies and impair incentives for fiscal prudence in the future. At the same time, fiscally sound member states would see part of the benefits of their prudence transferred to other states," he added.