Gary Jenkins, head of research at Evolution Securities in London, said: “Maybe future historians will identify this issue as being the start of what became a real fiscal union.” This means the possibility of joint eurozone bonds, an idea that has been touted over the past five years, could be closer to reality.

Jenkins said: “It does appear that we are creeping towards a European bond. If I was Germany, I would prefer the funding to be achieved on a set structural basis rather than through the guaranteed route, where you have to hope everyone else does the right thing.”

David Owen, chief economist at Jefferies in London, said: “I think that a single European bond is where we are inevitably moving, as the European Financial Stability Facility bond is basically achieving a similar thing by the back door. What is important to remember is that issuing paper still does not solve the underlying problems in the European Monetary Union, and the lack of strong support for the periphery.”
German officials have been vocal opponents of the idea, because their debt is the cheapest in Europe. Joint issuance would hurt Germany’s cost of funds, but the benefits of allowing the most troubled countries to issue under the umbrella of their stronger neighbours might be the only way to deal with persistent pressure on their costs.

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