The European Commission will present options soon for the introduction of euro area bonds, Commission President Jose Manuel Barroso said on Wednesday, but warned it would not put an end to a debt crisis that threatens the economic and political future of Europe.
Speaking before he addressed the European Parliament, Barroso delivered a stark assessment of the severity of the euro zone debt crisis, saying the region faced its most serious challenge in a generation.
This is a fight for the jobs and prosperity of families in all our member states. This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world. This is a fight for European integration itself, Barroso said.
He told lawmakers the Commission would shortly present options for the introduction of euro area bonds, as previously promised. The euro rose against the dollar, European shares turned positive and safe-haven German government bonds pared gains after Barroso's comments.
In an emotive plea for the European Union, and particularly the 17 members of the euro zone, to work more closely together, Barroso said the only way to stop the negative cycle in financial markets was to deliver deeper integration.
He urged that to come not via Germany or France taking their own initiatives that other, smaller member states were expected to follow, but via what EU officials refer to as the community method, where Brussels leads the initiative.
A system based purely on intergovernmental cooperation has not worked in the past and will not work in the future, he said.
European leaders have been battling to get on top of the debt crisis for more than 18 months. Their latest move, adopted on July 21, was to strengthen their 440 billion euro bailout fund, the EFSF, by allowing it to buy bonds in the secondary market and to lend pre-emptively to governments in distress.
But those decisions, which require parliamentary approval in the majority of member states, have not yet been fully implemented, undermining confidence in the ability of the euro zone to tackle the problems. Bond yields in Greece, Italy, Spain and elsewhere have been pushed higher as a result.
Barroso mirrored European Central Bank President Jean-Claude Trichet and other officials in calling for the quickest possible ratification of the July 21 agreement, saying it was critical to showing that Europe could deliver on its commitments.
Solid, feasible and concrete proposals have been made. They have been agreed upon. But they have taken too long and have not yet been fully delivered, he said.
EURO BONDS PROPOSAL
The European Parliament has long been an advocate for the introduction of euro area bonds, through which the 17 euro zone countries would jointly and collectively issue debt. Such a move would support weaker member states but push up the borrowing costs of Germany and other triple-A rated members.
Germany is adamantly opposed to the idea, saying it can only be considered once there is much tighter and closer fiscal coordination in the euro zone. A ruling by Germany's top court has meanwhile made it virtually impossible for Berlin to sign up even if it wanted to, according to legal experts.
But partly to placate parliament, the Commission has promised to present options on the idea.
There has been much debate on the need for eurobonds, Barroso said. Today I want to confirm that the Commission will soon present options for the introduction of eurobonds. Some of these could be implemented within the terms of the current treaty, and others would require treaty change, he said.
But he added that even if euro zone bonds were to be introduced at some point -- and if they require treaty change it is unlikely to come about soon -- it would not magically resolve the debt crisis.
This will not bring an immediate solution for all the problems we face and it will come as an element of a comprehensive approach to further economic and political integration, he said.
(Writing by Luke Baker; Editing by Rex Merrifield and Catherine Evans)