The Euro bond: Now there's an idea!
After a period of rising
sovereign bond yields in some of the weaker
EU members like
Spain that was approaching 7% for its 10-year, the solution being pressed to solve the crisis of confidence are
Euro bonds. What are
Euro bonds?
"...Borrowing costs are rising for many of the single currency's
17-members. Italy, Spain, Portugal and Ireland are among those that must pay
sky high interest rates on their debts. But what if France and Germany helped out? What
if the biggest economies on the continent agreed to issue euro loans on behalf of
all countries in the currency club? A euro loan, or bond, could be issued by
one country, but would be underwritten by all of them. Germany would pay more
for its debts and Greece
would pay less..." (
Source)
It's hoped that by providing this lower cost
source of funds backed by all of the
EU it will ease fears surrounding the unknown risks of a
Eurozone break-up that's been causing a run on banks in country's like
Greece.
Question: Would
Germany ever sign on to taking responsibility for funding
growth over austerity for the
PIIGS when it was the wild spending of the
PIIGS thanks to lower available borrowing costs that helped to bring this crisis on in the first place?
And if
Angela Merkel refuses to go along, in part for political and in part for pragmatic reasons, what would happen next to the economies across
Europe and by extension the
economy of Germany?
Prediction: More rhetoric and promises from the
PIIGS that allows
Merkel to save face and agree to the
Euro bond. Would this solve the
Eurozone financial crisis or just prolong it? Stay tuned!
In other words, "damned if you do and damned if you don't" also know as "stuck between a rock and a hard place!"
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