MADRID (MNI) – The Governing Council of the European Central Bank
has “absolutely no position” on the proposal of Eurobonds, ECB President
Jean-Claude Trichet underscored Friday.

“At this stage, there is no position of the ECB on the new proposal
that was just made,” the ECB head told assembled journalists at a press
conference in the Spanish capital, following a high-level gathering of
central bankers from Latin American countries.

With that statement, the ECB head essentially bowed out of the
debate that has captured the attention of European observers and
financial markets in recent days.

Although not a new idea, the proposal to issue bonds with liability
shared among member states of the Eurozone returned to the forefront
earlier in the week when Eurogroup President Jean-Claude Juncker and
Italian Finance Minister Giulio Tremonti aired a very specific proposal
for a European Debt Agency that would issue such bonds.

The idea was immediately shot down by Germany, and Juncker then
criticized Berlin for failing to take the proposal seriously, calling
the Germans’ behavior “uneuropean.”

Earlier Friday, German Chancellor Angela Merkel and French
President Nicholas Sarkozy made it clear, however, that Eurobonds would
almost certainly not be approved at next week’s meeting of Eurozone
heads of state and government.

Also Friday, ECB Governing Council member Ewald Nowotny called the
Eurobond idea an interesting one, but he emphasized that it was not
relevant at this time.

Trichet reiterated his call on national governments in the Eurozone
to follow through on promises of fiscal consolidation and structural
reform.

“We have always said we call each institution to be up to its
responsibilities. That has been our constant message. We are doing all
that we can to be up to our responsibilities, and we expect all other
authorities to be up to their responsibilities,” Trichet said.

Speaking about Spain, the ECB president said that the labor market
and pensions are two areas “where reform is essential for prosperity,”
but he reminded that this was true for “all economies in Europe.”

Turning to bank stress tests, Trichet said, they were “a very
useful concept and tool” and added that they will be conducted “on a
regular basis” in Europe.

Asked about stresses on the Eurozone’s periphery and reports that
Portugal was looking to Brazil for investments, he said, “I have
absolutely no comment on the relationship between Portugal and Brazil.”

Eurozone growth and steady upward revisions in forecasts that the
ECB has published in recent quarters, have “been confirming” that the
recovery is on track, Trichet underscored.

He put a positive spin on diverging growth rates in the Eurozone,
where at present Germany is moving ahead at a much faster rate than
Spain, noting that a few years ago the roles were reversed.

Such a rebalancing is “of course good for all…I would present
this as something that is good, if I may,” Trichet said. “But that does
not mean that it is time for complacency,” he added.

Trichet also noted that “the price of oil and commodities is a
permanent issue for all central banks in the world.”

–Frankfurt bureau, +49-69-720142, tbuell@marketnews.com

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