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Germany insists no eurobonds to solve debt crisis

Germany has again made clear its opposition to French proposals for jointly-issued bonds from the 17-nation eurozone as a way to create economic growth and ease the region's financial crisis.

At Saturday's G-8 summit, German Chancellor Angela Merkel — under urging from U.S. President Barack Obama and French President Francois Hollande — signed up to a statement that called for mixing painful cutbacks with growth-promoting measures to deal with a crisis that threatens the global economy.

The leaders warned that budget deficits have to come down. But they also acknowledged that an approach that's based mostly on austerity and longer-term reforms can't help countries out of recessions this year or next.

How exactly to encourage growth has become a controversial topic among European leaders, who will meet Wednesday in Brussels to try to find common ground.

France's Hollande has pushed for issuing debt backed by financially strong countries like Germany to finance growth in weaker countries like Greece or Portugal as one solution to the problem. Germany, however, has long and firmly resisted the idea of introducing eurobonds, arguing they would lessen pressure for heavily indebted countries to get their finances in order. They would also likely raise borrowing costs for countries in better shape, such as Germany.

Eurobonds would be "a prescription at the wrong time with the wrong side-effects," Steffen Kampeter, a deputy finance minister, told Deutschlandfunk radio.

"We have always said that as a first step we need solidity in European finances, and that is the fiscal compact," a budget-discipline pact that Merkel championed and Hollande has criticized, he said.

Germany's tough stance against the idea of eurobonds came as France's new finance minister met his German counterpart for the first time on Monday.

France's Pierre Moscovici met Germany's Wolfgang Schaeuble in Berlin, stressing that the informal summit of EU leaders in Brussels on Wednesday only makes sense when "all options are on the table ... also the controversial issues."

But on the so-called Eurobonds, Moscovici acknowledged that the two ministers merely exchanged their well-known different point of views on the issue. "For us, it is a strong idea. Of course you cannot force it upon anyone, but we have to talk about it," he said.

In addition to Wednesday's meeting in Brussels, there will be a summit at the end of June at which the issues of economic growth and austerity will likely be the main point of debate. Merkel said last week that "it will be very important that Germany and France present their ideas together at this summit."

Schaeuble and Moscovici — representing the eurozone's two largest economies — both stressed that they seek a close cooperation in drafting Europe's policies in tackling the debt crisis.

"France and Germany have a particular responsibility," Moscovici said. "If we don't agree, nothing is possible" to be agreed upon in Europe, he said.

Hollande pledged during his election campaign to renegotiate the fiscal compact with a view to placing greater emphasis on growth, but left open when he visited Merkel last week whether he will now stick to calling for a full renegotiation.

"We need the fiscal compact, we need budget discipline, we need investments in the future," Kampeter said.

Merkel has spoken increasingly about growth over recent months but argues that it makes no sense to try to achieve it by running up still more debt. Government spokesman Georg Streiter said she was very satisfied that the G-8 didn't call for lighting an "economic policy straw fire by throwing tax money into stimulus programs."

Schaeuble reiterated the government's stance Monday, saying that Germany was open to discuss all growth-promoting measures but adding that the ultimate goal must be creating sustainable growth through a path of fiscal consolidation.

At home, Merkel needs support from the opposition to ratify the fiscal compact, which requires a two-thirds majority in the German Parliament. It is angling for concessions, such as a commitment to introduce a tax on financial transactions whose proceeds could be used to stimulate growth.