EUROPEAN COMMISSION president José Manuel Barroso has said the euro zone is prepared to help any EU state that is threatened with defaulting on its debt during the current crisis.
But he said yesterday several euro zone states were strongly opposed to setting up a mechanism to enable countries using the euro to band together to issue joint euro bonds.
“It is an interesting idea from a European point of view, I can’t hide that. But quite a lot of countries are opposed to it . . . There is no consensus,” he told journalists at a briefing on the European Commission’s economic recovery and financial reform plan.
States such as Ireland and Greece are paying a much higher interest rate than Germany on cash they raise from international money markets due to a lack of confidence in their economies.
The commission has consulted euro zone states about the possibility of setting up an EU debt agency to enable states to band together and issue joint bonds.
However Germany, which benefits from relatively low interest rates compared to other less financially strong economies in the Union, opposes any mechanism to issue euro bonds.
He reiterated comments made by EU Economic Affairs Commissioner Joaquin Almunia this week that the euro zone is prepared to help any state at risk of default.
“We are considering all options. We are monitoring the situation inside the euro zone and outside the euro zone, and I am sure that we are going to be able to respond to any difficult situation.
“If there is a problem in the euro area we will have the means to act, but I am not now going to speculate about how, when, which countries, because we are dealing with markets. We have to be careful with comments we make,” he said.
“We believe we have instruments in Europe to react to a situation like the one you have described,” he said in response to a question on whether the EU could bail out a euro zone country threatened with bankruptcy.
Mr Barroso announced the commission would publish detailed legislative proposals for a major reform of the EU’s financial supervision and regulatory structure in May.
These would seek to strengthen bank capital rules, streamline supervision of financial institutions, enforce more transparency in derivatives markets and ensure that bank remuneration policies do not encourage excessive risk-taking.
“There should be no financial entity that escapes from financial regulation, neither in Europe nor the rest of the world . . . All financial entities should be subject to a certain degree of regulation and supervision. No territory, state or individual can separate and work underground,” said Mr Barroso, who added that EU leaders needed to act now to introduce a major reform of financial supervision in Europe and across the world.
He said proposals for more pan-European supervision advanced last week in a report by former Bank of France governor Jacques de Larosiere should be introduced without delay.
Mr de Larosiere had recommended introducing the new system of regulation and supervision over three years but the commission wants to skip the phase-in.
The proposals must still be debated by member states and the European parliament, with Britain already raising some objections to the powers delegated to new pan-EU bodies.
