BERLIN (MNI) – Germany’s government opposes the idea of issuing
joint Eurobonds to support ailing Eurozone member states and also sees
no need to step up the current volume EU rescue funds, a German
government spokesman said Monday.

Eurogroup Chairman and Luxembourg Prime Minister Jean-Claude
Juncker together with Italian Finance Minister Giulio Tremonti proposed
in an opinion piece published in Monday’s Financial Times that the
European Union should create a single sovereign bond issuing agency for
the entire region to help calm market concerns over debt among Eurozone
peripheral states, and to lower borrowing costs.

“The German government opposes Eurobonds,” German government
spokesman Christoph Steegmans said at a regular press conference here.
The government is opposing Eurbonds both for economic and legal reasons,
he stressed. Issuing joint Eurobonds would require “extensive
modifications” of the EU Treaties, he argued.

German finance ministry spokesman Martin Kreienbaum, speaking at
the same press conference, added that Eurobonds would also undermine the
budget discipline in the Eurozone. “A Eurobond would distract [member
states] from their national responsibility for budget and fiscal
policies,” he argued.

Steegmans underlined that Germany feels committed to the euro and
its stability. “If the euro fails then also Europe will fail,” he
warned. “Everything that is good and necessary for the euro is currently
[being] done, the people and markets can trust in that,” he pledged.

Finance ministers at today’s Eurogroup meeting and tomorrow’s
Ecofin gathering “will send a joint signal for more stability and
trust,” he said.

The government spokesman rejected demands for stepping up the
current EU rescue funds. “We currently do not see any necessity at all
to increase the volume of the euro rescue umbrella,” Steegmans said. He
noted that at the moment only a small part of the rescue funds are being
used.

These comments are a rebuff to the International Monetary Fund
(IMF), which at today’s Eurogroup meeting is expected to call on
Eurozone governments to increase funds available under the European
Financial Stability Facility (EFSF) and to pressure the European Central
Bank to further step up its government bond purchases, news agency
Reuters reported, citing an IMF report.

ECB President Jean-Claude Trichet hinted strongly on Friday that
the ECB was open to larger bond purchases and that the EU governments
should increase the funding of the EFSF. Measures taken by the
governments and the ECB, he said, must be “commensurate with the
magnitude of the challenges” in financial markets.

Belgian Finance Minister Didier Reynders on Saturday also suggested
increasing EFSF funds, reflecting the growing urgency among policy
makers to thwart potential contagion from Greece and Ireland.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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