European Union President Herman Van Rompuy's blueprint for the future of the euro is shaping up to include a discussion of jointly-issued short-term bills, a debt redemption fund, and common banking supervision.
The findings will be presented to EU leaders in Brussels next week by Van Rompuy, European Central Bank President Mario Draghi, European Commission President José Barroso, and Luxembourg’s Jean-Claude Juncker, who leads the group of euro area finance ministers.
Euro area finance chiefs meet today in Luxembourg as policy-makers struggle to find ways to shore up confidence in the euro as Greece’s debt woes and soaring Spanish bond yields tear at the fabric of the 17-nation currency bloc. EU leaders clashed over joint debt sales in May, leading them to ask Van Rompuy to set out “building blocks” towards more integration. Jointly-issued debt and cross-border deposit insurance were two of the areas flagged for closer study.
As the report comes together, the officials said, work is focusing on two possible debt options: jointly-issued short-term bills and a debt redemption fund, as has been proposed by economic advisers to German Chancellor Angela Merkel. Neither idea has gained traction with Merkel, who also is resisting separate proposals for direct sovereign-debt purchases through the euro area bailout fund.
Issuance of short-term bills and a debt redemption fund would each represent progress from current country-specific borrowing arrangements, though both have limits that may make them intermediate steps toward jointly-issued medium- and long- term debt. Eurobills would have very short maturities, thus limiting common exposure.
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