On Wednesday, all major heads of state in Europe will be attending an informal European Union summit in Brussels, Belgium. It is certain that the topic most likely discussed is the issue of the Eurobond. The debate between euro zone member states about the issuance of the Eurobond has dominated this week’s news on the currency crisis in Europe. Though there are many member countries in favor of its issuance, German Chancellor Angela Merkel has stated clearly that she has no interest in their issuance, and as such, without her backing, the Eurobond will likely be blocked.
The Eurobonds would be issued by the euro zone countries as a whole, meaning that it would be a collective debt held by each of the 17 members. It is being promoted by French President Francois Hollande and lead anti-austeritarian, as the best long term solution for the economic depression caused by austerity measures. He is backed by a number of other EU leaders including those from Italy, the European Commission, the International Monetary Fund, and the Organization for Economic Co-operation and Development, who propose the revenue from the bonds be used for investment in job growth.
Though Merkel has generally stood firm and alone, on the issue of maintaining austerity provisions of the Fiscal pact, she is not alone in blocking the Eurobond. Leaders from Austria, Netherlands, and Finland also do not want to see it being used as a proposed solution. Merkel is afraid that the Eurobonds will take away the necessity and incentive for the more insolvent countries to achieve financial responsibly. She also has the genuine concern that Germany would end up guaranteeing the loans as they are the only AAA rated country in the zone.
Germany and France are the dominant countries of the euro zone, and their consensus on all policies is needed to ensure they are implemented. There will be a strong push for the Euro bond in Brussels on Wednesday, however, without Merkel, and as such Germany’s, backing it will almost certain never be implemented.