European leaders are meeting in Belgium Wednesday to address the continent's worsening debt crisis, and to weigh a radical proposal to overhaul Europe's financial makeup. At the insistence of newly elected French President Francois Hollande, policymakers will discuss whether to create a "eurobond," a jointly-issued borrowing instrument that would essentially transform the euro currency bloc into a common debt pool, grouping the countries' existing IOUs. Creditworthy nations like Germany would offset debt-beleaguered countries like Greece, which would lower the latter's borrowing costs and ease the pressure to slash budget deficits. The proposal comes as Greek voters flirt with exiting the euro over objections to German-backed austerity programs. Will Europe adopt the eurobond?
It should. But Germany won't agree to it: Eurobonds are finally on the menu, and "they are probably just the diet many" debt-saddled countries need, says Nicholas Hastings at The Wall Street Journal. For Spain and Greece, "eurobonds could make all the difference between meeting their obligations and being forced to seek another bailout." The problem is that borrowing costs for Germany, Austria, and other creditworthy nations would rise slightly, and German Chancellor Angela Merkel will likely object to "directly sharing the financial burden" of others.
"Hollande's efforts to push eurobond solution likely to fail"
Merkel hopes to eke by with more modest efforts: The German chancellor's hope for the summit is that a "more growth-friendly agenda and some signs of compromise" will be enough to persuade Greek voters to side with domestic political parties that support continued euro membership, says Paul Ames at Global Post. But let's face facts: "Without drastic action, the eurozone is headed toward a disastrous breakup." Despite her minor concessions, Merkel is "still playing Dr. No."
"Are eurobonds the answer?"
Actually, Germany might agree to eurobonds: "Clearly, the issuance of joint eurobonds would help to solve Europe's debt crisis" by minimizing the risk of default by Greece and others, says Edward Harrison at The New York Times. And Germany might agree to eurobonds if less creditworthy nations sign on to a "fiscal compact" that essentially gives European leaders more power over the budgets of debt-burdened nations. If Germany is going to take on more risk, it will want more control over how other countries manage their finances.
"The path to eurobonds"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- China's leader is telling the People's Liberation Army to prepare for war
- The best books we read in 2014
- How I lost all my money
- Diagnosing the Home Alone burglars' injuries: A professional weighs in
- Why Pakistan won't hunt down the terrorists within its borders
- How to save money: 12 great personal finance tips
- The religious right isn't retreating — it's reforming
- How academia's liberal bias is killing social science
- 43 TV shows to watch in 2014
- How to be the most productive person in your office — and still get home by 5:30 p.m.
Subscribe to the Week