Verbatim report of proceedings

Tuesday, 14 February 2012 - Strasbourg

14. Feasibility of introducing stability bonds (debate)

  President. − The next item is the debate on the question for oral answer to the Commission by Sharon Bowles, on behalf of the Committee on Economic and Monetary Affairs, on the feasibility of introducing stability bonds (O-000333/2011 – B7-0022/2012).

  Sharon Bowles, author. − Mr President, I am presenting this oral question and resolution on behalf of the Economic and Monetary Affairs Committee. We postponed the debate from the last Strasbourg session as Commissioner Rehn could not attend. So we are disappointed that, once more, other duties have called him away.

We are well aware, in the Committee, of all the strands of the arguments, from those that inherently support common stability bonds to those of the opposite view. But we are of the view that, in some form, they are part of the picture. If we look back at our attempts to stabilise the euro zone crisis, they can be characterised as believing that, within a monetary union, a small part would not bring down the whole, just as one city or state does not bring down the US.

There has been a belief that, because of the political commitment of the whole, the deterioration in a highly-indebted Member State would not follow the path of that experienced in other individual indebted countries. We can blame delay and prevarication for our attempts always being behind the curve, but it is time to examine missing elements too, including the fact that what we do also marks the level of ambition and commitment to the next stage of evolution of the monetary union and to the euro’s place as a reserve currency. In other words, ambition counts: maybe even more so in this time of awful austerity. Therefore we are anxious to learn what are the interim results of the consultation on stability bonds and, based on the consultation, what are the next steps foreseen by the Commission.

Since the Green Paper was issued in October, there have been further political agreements – such as those of the European Council in December – which have also been carried forward. These decisions to enhance the sustainability of public finances also contribute towards creating the necessary conditions for the potential introduction of stability bonds. Therefore, what kind of policy instrument would be the most effective in the short term?

As I said with regard to ambition, stability bonds would show that there is a medium term plan beyond austerity. The ‘redemption pact’ proposed by the German Council of Economic Experts shows a long-term way that excess debt could be handled. There is some similarity between that plan and how the Australian states first moved to common issuance.

Neither should we overlook the possibility of short-term euro bills. I dubbed these once ‘the beginner’s bond’, but they could be both time- and quantity-limited, with good behaviour needed to allow rollover. Bills also have the advantage of lower interest rates and in these times of high debt, struggling fellow-Member States do need every single basis point squeezed off what they have to pay.

From a personal point of view, taking that overriding necessity of squeezing down debt servicing payments, I would see eventual recirculation of the profit element of bond interventions by the European Central Bank back to the indebted Member State as a reasonable manoeuvre.

Mr President, as I have not taken all my time, I would be happy if you would allocate the rest to Parliament’s rapporteur Sylvie Goulard.

  Neelie Kroes, Vice-president of the Commission. − Mr President, it is a pleasure for me to replace my dear colleague Olli Rehn. The consultation on the Green Paper on the stability bonds finished on 8 January. It is fair to admit that the feedback via the official channels of this consultation has been quite limited. We have received only 18 replies to the internet questionnaire and to DG ECFIN’s functional mail box. These replies came mostly from private citizens and to a lesser extent from different institutions.

Thus I would hesitate to consider this feedback as representative. I would also hesitate to consider those replies as substantially helping or guiding us in deciding about useful next steps as regards possible common issuance in the euro area.

Of course, in the mean time we have had many other informal contacts and consultations with a wide range of stakeholders, academics, financial institutions and government representatives. Also this House has been and will continue to be crucial in this debate. I am grateful for the first indications and views by Sharon Bowles and Sylvie Goulard on behalf of the Committee on Economic and Monetary Affairs in their motion for a resolution of 21 December, and I would in particular like to thank Ms Goulard for all her initiatives.

These additional contacts have proved highly useful and productive. Yet they only further illustrate the basic choices and trade-offs that we face when envisaging any form of common issuance in the euro area. Such an instrument can deliver very tangible, positive results on the integration and stability of European capital markets.

The more ambitious our approach is, the higher benefits it will bring. At the same time the possible challenges remain daunting. We would have to ensure that solidarity and guarantees across Member States for the large-scale funding of governments do not weaken the incentives of governments to good fiscal behaviour.

What becomes clear from the consultations and informal contacts is the necessity to keep it simple. Complicated structures or instruments, based on complex financial engineering, are considered with a fair amount of suspicion and investors’ hesitance.

What is also clear is that stability bonds should not be reduced to being seen as just another item in the arsenal of potential short-term crisis tools. Yes, if deployed quickly, and depending on their specific form, they can make an important contribution to the current sovereign debt crisis, but in their essence Eurobonds or stability bonds have a much larger potential.

They can profoundly contribute to integrating European capital markets at their core, thereby fostering efficiency and the international attractiveness of Europe as an investment location. In brief, our goal should be to create a strong, simple and creditworthy new instrument that would be likely to become the new risk-free benchmark on European financial markets.

In terms of the next steps, given the ambitious goal and the importance of the issue, the Commission plans to further clarify the key issues linked to the introduction of Eurobonds. There are many quite technical topics to be analysed before any definite decisions are taken and we must take the time to do so, as nothing should be left to chance here.

The new economic governance as agreed by the European Council in December is a welcome development. We do need more fiscal consolidation, also in the context of the Eurobonds. As I have said before, Eurobonds without fiscal consolidation will not work, and I strongly believe that we will have to combine those two. In that respect, many respondents to the consultation of the Green Paper have pointed to the merits of keeping financial markets as a signalling and corrective device for the conduct of economic and fiscal policies in Member States. Hence, a full substitution of Member States’ issuance by common issuance would, according to those voices, not be advisable.

We have studied with interest some proposals to link joint issuance...

(Interjection from Mr Bloom: ‘Three minutes, we’re now getting up to six – let’s do our job, Mr President.’)

...explicitly to fiscal coordination by Member States and to limit the time frame of joint issuance, at least initially, to the time needed to redress Member States’ government accounts to sustainable levels. In particular the proposal of the German Council of Economic Experts for a debt redemption fund goes in that direction.

My last sentence – and this is my last sentence, Mr President – concerns an interesting issue. When mapping out the way forward we all will have to keep in mind the limitations of the approaches presented in the Green Paper and strike the right balance in terms of...

(Interjection from the President: ‘The time is also a barrier.’)

...respective advantages and disadvantages to market integration efficiency and stability. I count on the European Parliament to play an important and constructive role in this process.

(Interjection from Mr Bloom: ‘This is totally ridiculous.’)

  President. − I am very sorry but the Commission is also obliged to keep to its speaking time.

  Diogo Feio, on behalf of the PPE Group. – (PT) Mr President, Commissioner, the question asked here today and the Green Paper on stability bonds result from the work done in this Parliament on the six pack. This is an agreement between Parliament and the Commission to add a growth perspective to the idea of stability and the required discipline.

In November, Parliament heard President Barroso highlight the Commission’s lines of action: growth, discipline and talk of issuing joint debt. President Barroso said that the euro area could solve its problems, and that issuing joint debt could be done with more oversight, more discipline and coordination, with true economic governance.

Ladies and gentlemen, we face a great challenge. Europe has already produced many documents: Europe 2020 strategy, the roadmap to stability and growth, the Euro Plus Pact and the Annual Growth Survey. The European semester, the Commission programme geared towards growth, is also a recent interinstitutional agreement. We are open to short-term solutions being considered, such as those proposed by the wise Germans. We are open to other solutions that are more medium- and long-term. However, we would say that now is the time to see the path ahead; a path that requires determination and decisiveness. In this regard, however few responses there might be to Commission proposals, Parliament will always be here.

  Edward Scicluna, on behalf of the S&D Group. – Mr President, enough time has passed since the current crisis started for a vigilant observer to note that the crisis resolution remedies are not working. Much energy and time was lost by our EU institutions in devising ways to prevent a sovereign debt crisis from occurring again, rather than addressing the more immediate present and clear danger by a proper crisis resolution mechanism.

It is unfortunate that the two largest countries have ignored the early advice given in Parliament by some groups, including ours, that fiscal austerity on its own cannot by itself get us out of our predicament. While it is obvious that the current medicine is not doing any good, the reaction to this state of affairs is unfortunately not to do the logical thing and change the medicine, but to give more of it on the pretext that the dose is not strong enough.

This report on Eurobonds is one important plea for sanity. It is a direct constructive proposal for a change to the current effective euro zone architecture. It is an opportunity for the euro zone to show that it is not just offering a knee-jerk solution to the latest downgrade, but clear-headed thinking. It is not a total cure, but it should be seen as a building block to the already set foundation of a European stability mechanism.

Of course we cannot introduce a Eurobond in a matter of weeks or even months. The most we can do – and the aim of our resolution based on the Green Paper goes in that direction – is to issue a credible statement of intent, thus setting in motion a change of legal events to bring about the needed changes. But in doing so we would be strengthening the case for bestowing the EFSF-ESM with the much-needed banking licence which will supplement the ECB’s successful purchasing exercise at the end of last year. The contagion is spreading and it has started eating at the core. Let us stop it before it is too late.

  Sylvie Goulard, on behalf of the ALDE Group. – (FR) Mr President, Commissioner, I would like you to let Mr Rehn know that we are very disappointed that he cannot be here this evening. We had postponed this debate for him and I think that it is an important issue, even though we know that he has serious responsibilities in relation to Greece.

In the six-pack, as Diogo Feio pointed out, we fought for the Eurobonds issue to be dealt with rigorously. This was stated in my report and my objective was two-fold: it was to show that those who were permanently opposed could be mistaken and that those who were going to vote in favour tomorrow morning were ignoring a number of problems.

I would like to thank the Commission for having contributed to this in-depth work with its Green Paper. I think that there are some measures that need to be taken immediately and others that are more long-term. In the report that I will prepare, that is the direction that we would like to take, presenting a roadmap that makes a clear distinction between what can be done immediately and what will of course require significant legal steps, and that is an important point, which is why I am emphasising it for my colleagues with difficulties.

In the short term, I believe that it would be extremely important – as has already been mentioned – to help highly-indebted Member States to fulfil the very strict commitments that they made in the six-pack in terms of the rate at which they reduce their debt. We need to help them, not just by imposing standards but by finding ways of meeting them effectively.

The Group of the Alliance of Liberals and Democrats for Europe fully supports the idea of the redemption fund or Tilgungsfonds du Sachverständigungsrat proposed by Germany.

Secondly, I must highlight one extremely important point. At the moment we are focusing on the crisis and we are forgetting why we wanted to forge a currency together. That currency has a global objective, which is to contribute to the stability, at global level, of the various currencies and, as you said, to offer foreign investors a chance to invest in a region that we hope is stable – and we are working on that – and that has a liquid market.

It is a long-term objective and it is an objective that goes hand in hand with the political union, which is linked to the single currency. We are ready to work towards that objective, as Diogo Feio said, and perhaps to go even beyond what the Commission proposes. In any event, that is the way I see it. It is a long-term project that aims to ensure that the euro takes its rightful place among the global currencies and to make the European Union, to an even greater extent than today, a political union.

I have one final comment to make: it seems, Commissioner, and I do not wish to be disagreeable, that, contrary to what normally happens, you have not published the responses to the consultation. To begin with, you set extremely short deadlines because the responses had to be in by 8 January, which was not a very convenient date, and as far as I am aware – unless I am mistaken – the responses are not to be found on your website.

I believe that this is a transparency issue. We do not hide anything from the citizens, and we would like to know exactly what all of the parties concerned said openly and be able to respond to them.

  Sven Giegold, on behalf of the Verts/ALE Group. – (DE) Mr President, Commissioner, ladies and gentlemen, this situation reminds me of the time when, as a House, we took a cross-party decision that we wanted a financial transactions tax at European level, too. Tomorrow – and I am convinced of this – there will be a broad majority in favour of further steps towards common bonds in Europe. That is important for this crisis. With such a majority, Parliament would be sending out a clear signal that – in contrast to what many of the national parliaments and sections of the public have been happy to say – stability bonds are no work of the devil and instead have important benefits. This joint declaration shows that. They have important benefits, they provide a deep market that, at the end of the day, is highly liquid and thus capable of providing lower interest rates for all of Europe’s Member States for the long term. It is a prerequisite for communally secured debt that there is functional fiscal policy and that the budgets are sound. Ultimately, only when that is in place can there be large-scale communally secured debt. Comments of this kind have to be tempered, however, as we have long had communally secured debt in the European Investment Bank and the European Financial Stability Facility (EFSF).

It is also important, however – and this is my second point – that this resolution shows that the strategy pursued by the Council to handle the crisis up to now is illusory. A number of countries have major solvency problems and simple economic calculations show that involving private creditors in Greece was simply not enough. Similarly, austerity alone cannot solve the problems in these countries – nor can growth alone. Simple calculations by the Kiel Institute for the World Economy show that the primary surplus of countries such as Portugal and also Greece is too high – even after the debt haircut for Greece that has still not quite been adopted – to ultimately see these countries emerge from the crisis. That is why the model put forward by the German Council of Economic Experts of having low interest rates to finance pre-existing debt is important.

Commissioner, I beg you to take this back to your fellow Commissioners. Do not allow yourselves to be sidetracked by the resistance of a few Member States. Without low interest rates for everyone, there is no way out of the euro crisis. You must, therefore, fall back on the Council of Economic Experts’ model. Examine the other models, too, and bring forward a bold and definitive proposal. The voice of Parliament is telling you that we want you to make your submission quickly.

  Kay Swinburne, on behalf of the ECR Group. – Mr President, sovereign issuance of debt is a national necessity and a way in which national governments can raise the funding required to pay for their policy delivery. The cost of funding to a sovereign is the single most important method of ensuring they do not live beyond their means.

Fiscal prudence and the direct relationship between lender and borrower, in this case the Member State and the financial investors in government bond markets, are the brakes on the system, preventing overspending in the short, medium, and long term. Currently sovereign issuance in the euro zone is still conducted individually by euro zone Member States, but the stability bonds being proposed would entail a significant pooling of sovereign issuance. It remains to be seen whether a stability bond could be designed so that it does not lead to an increased risk of moral hazard.

Removing the direct link between a sovereign and its investor is a risky strategy. However, designing a stability bond which delivers a reduced cost of debt for some poorer euro zone countries at an acceptable expense for the more wealthy is as big a challenge. As the German Ambassador recently said to a House of Lords inquiry, stability bonds are not a solution to the existing crisis. If there is any debate about Eurobonds this is not the time to have it. This is something that could be the crown to an existing fiscal union, but it would have very great moral hazard in an incomplete monetary union. We need to listen to his wisdom. If a Member State spends or borrows too much, it risks losing investor confidence. Collective issuance of debt will not disguise the fundamentals and investor confidence in the whole of the euro zone may unnecessarily be put at further risk.

  Miguel Portas, on behalf of the GUE/NGL Group. – (PT) Mr President, while the governments are capable of approving a new treaty at the speed of light, a debate like this on Eurobonds moves forward at a snail’s pace and in a forest of ambiguities. On one hand, we recognise that the euro area finds itself in a unique situation, with the euro area Member States sharing a single currency without a common fiscal policy or a European bond market. In view of this, the problems of the euro are not Greek, Portuguese or Irish, but European, because there cannot be a sound currency without a European budget worthy of the name and there cannot be a sound currency without the ability to issue bonds at that same level. On the other hand, however, the resolution also says that the stability of each country, budgetary stability, is a condition, a pre-condition, of Eurobonds. This is like telling someone who is sick that they only have the right to medicine if they are somehow miraculously cured. This is absurd. It makes no sense.

European bonds should be viewed in the long term as a public instrument for financing economies and not as a prize offered to governments for complying with the most ridiculous of agreements so far invented, the treaty reinforcing the Stability and Growth Pact. European bonds should contribute to restructuring the debt of countries in difficulties or the history of the coming years will continue to be written in Greek and founded on large doses of austerity, humiliation and despair.

  Godfrey Bloom, on behalf of the EFD Group. – Mr President, in the 1970s the Community Reinvestment Act in the United States made due diligence in banking illegal. To pursue a political goal, the Administration laid open the pathway to what we now know as sub-prime debt. It proved to be – as I said it would at the time – a pathway to hell paved with good intentions. It was conceived to make banks lend to people who could not possibly repay.

We politicians now love to blame the banks, but it started with politics. Sadly, politicians do not understand money. How else could we have got ourselves into this appalling mess? Yet we have learnt nothing; we are now advocating a form of Eurobond, a sub-prime debt instrument by any other name. Again, we are bailing out the banks at the expense of the taxpayer. The ECB, the Bank of England and the Fed are all at it: print money; give it to the banks to buy junk bonds – bogusly rated as double A – to shore up their reserves and guarantee salaries and bonuses that ordinary people can only wonder at.

We have learnt nothing from the 2008 crisis. We are desperately clinging to a failed political ideal as our cities riot and burn. The day must surely come when politicians, bureaucrats and central bankers must be called to account by a fiscal crimes tribunal and sent to prison for a very long time.

  Andrew Henry William Brons (NI). - Mr President, when it comes to borrowing money, interest is not the only price you pay. Your creditor or guarantor will demand conditions for the loan. Stability bonds might facilitate borrowing by insolvent countries by providing a joint and several guarantee of repayment. However, the real price to be paid by the peoples of ailing countries, rather than their governments, will be even more budgetary constraints, leading to economic depression, greater unemployment, misery, homelessness and even suicide. For Greece, the cradle of democracy, the unelected Commission will determine tax and spending policies that should instead be determined by Greek voters through their elected representatives in their own national parliament.

These sacrifices might be worthwhile if they guaranteed prosperity for the ailing countries. However they are locked in a currency that is absurdly overvalued for their economies. They need reversion to their own currencies, which will devalue and then produce export-led recoveries.

  Corien Wortmann-Kool (PPE). – (NL) Mr President, the past year has seen important steps taken to strengthen the basis of our Economic and Monetary Union. Crucial elements of this are the ‘six-pack’, the permanent emergency fund, the new treaty and the decision by the European Central Bank to lend our banks EUR 500 billion in three-year loans. There are still major problems, but confidence is gradually returning, and we must be ambitious enough to continue on our path towards lasting economic growth.

Therefore, on behalf of our group, I welcome the proposal that Commissioner Rehn has presented regarding the macro-economic surveillance. Structural reforms are needed to ensure growth and competitiveness in Europe. But we need to continue to reinforce our Economic and Monetary Union, for that is the basis of our welfare and employment. Hence the importance of discussing stability bonds, since the issue of these bonds is still split up between 17 different markets in Europe. As a result, we are losing out on significant advantages.

Eurobonds will not solve the present crisis and are no excuse for not carrying through necessary, if sometimes painful, economies and reforms. Stability bonds, however, may well make a very positive contribution in future to a far more efficient issuance of State bonds and offer advantages to all of us in Europe. The EP’s resolution is consequently also a significant encouragement to the European Commission in its plea for further investigation of this highly complicated matter. There is still a lot to be disentangled, so please persevere along your pathway, full of man-traps though it be, for, looking to the future, it is in the interest of all of us to work towards the issuance of joint bonds.

  Gianni Pittella (S&D). – (IT) Mr President, it has to be clear that the point of Eurobonds is not to shift the responsibility of badly behaved countries onto the shoulders of well-behaved countries. We all need to relax. No one is thinking of ripping off their neighbours. Germany’s reservations were initially understandable, but are now groundless as it is possible to design Eurobonds that will allow some countries to cut the cost of their debt, without increasing it for others.

As some of us have mentioned, the introduction of Eurobonds needs to be part of a process of greater integration and fiscal coordination between euro area Member States. However, it will also be necessary to be pay careful attention in order to ensure that this transfer of fiscal sovereignty takes place via institutions with full democratic legitimacy, like the European Parliament.

I want to say this in the strongest possible terms. There is no response to the authoritarian procedure of the fiscal compact. Ladies and gentlemen, tomorrow’s will be a historic vote. We will be planting an important seed in order to save Europe and move rapidly towards a Europe with economic government, fiscal coordination, and therefore a political Europe.

  Carl Haglund (ALDE). - Mr President, first of all I want to thank Ms Goulard for making a good job of trying to consolidate the variety of views in this House on this complicated issue. I think Ms Goulard has done a good job in trying to address all of the criticisms put forward by those who are not very positive towards the Eurobond. At the same time, however, the fundamental challenge that some of us have with Eurobonds is whether we regard common issuance – in other words, joint liabilities – as something that is politically acceptable. This cannot be solved by technical solutions involving ‘red’ and ‘blue’ bond models and such like.

I personally am in favour of the redemption fund, and I want to remind this House that we have agreed together on the ‘six-pack’, the coming ‘two-pack’, the international agreement, etc. Hopefully, all of these will bring the European economies into balance, so why do we need Eurobonds at this stage, since at that point all countries should be able to get loans on the markets for a reasonable price? We have not answered that question, and the question whether our endeavours are economically or politically motivated has perhaps not been sufficiently answered at this point in time.

  Pascal Canfin (Verts/ALE). – (FR) Mr President, Ms Kroes, in your speech on behalf of the Commission you said: ‘Eurobonds without fiscal consolidation will not work’. You are quite right. However, what we have today is fiscal consolidation without Eurobonds. What we are proposing here in Parliament is a balance between the two. The package you are proposing today is unbalanced.

These are not our words. Listen to the rating agencies. When Standard & Poor’s downgraded France a few weeks ago, what it was saying was: ‘Austerity alone does not work’. You do not have to believe me, you do not have to believe the left here in the European Parliament, but you can believe the rating agencies, if you listen more closely to them.

The challenge is to put in place today a roadmap because we do not underestimate the legal challenges and technical complexities. It is precisely because it is complicated, however, that we need to start immediately in order to send a message and prepare for the battle as quickly as possible. Over and above the technical and legal issues, there is also the political dimension.

In Europe today do we want to do what the United States did 220 years ago, which was to pool, gradually, its public debt as a sign of solidarity and a reflection of a political will to create a political union? I believe that a majority of this House would wish to move in that direction. Surprise us in the European Commission! For once, be truly European and ambitious!

  Claudio Morganti (EFD). – (IT) Mr President, ladies and gentlemen, we have wasted too much valuable time in moving in a direction that to me appears logical, as well as obligatory.

Struggling Member States are being asked to make considerable cuts to their budgets and there have even been suggestions of them being put into administration. They cannot afford to pay thousands of euros more than other euro area countries to refinance their debt, or they will never get over this crisis.

I think the solution recently proposed by some French analysts is very interesting. It involves a shared issue of European securities weighted according to the situation of the different Member States. This would deliver general savings on the costs of refinancing, which would be beneficial not only to the countries paying more, but also to the ‘well-behaved’ countries.

We need to act quickly. Europe can no longer be dominated by the interests of a single country that demands to decide for all the others.

  Werner Langen (PPE). – (DE) Mr President, Eurobonds are an instrument that has to be strictly linked to conditions – the first condition, for example, being an extensive treaty change. Such a change is required because it has not been possible to introduce these Eurobonds under the existing European treaties. There is also a hidden meaning under paragraph 11 of the resolution, which refers to ‘appropriate legal requirements’. That simply will not do – only treaty change will suffice.

Turning to my second point now, the resolution as a whole is the result of an intensive exchange of opinions. I would like to express my sincere thanks to Ms Goulard for having managed to incorporate in this resolution both the demand for Eurobonds and the misgivings raised about them, as well as the prerequisites. I therefore believe, even if there is a desire to hold separate votes about one point or another, that we in the Group of the European People’s Party (Christian Democrats) will vote in favour of this joint resolution with a large majority.

That does not mean, however, that the problems will have been solved. The introduction of Eurobonds requires a treaty change approved by all 27 Member States. Even the proposal tabled by the German Council of Economic Experts for appraising economic development cannot hide the fact that even the communitarisation of debt over 60% requires a basis in the Treaties. We are on a long road and, in contrast to paragraph 7 of the resolution, I do not believe that the Commission has brought forward an excellent Green Paper, but a poorly produced one. Vice-President, you confirmed it yourself: there were only 18 interventions. I have never seen anything like that in the last 20 years. That can only go to prove that the Commission has not been doing its work so far.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Sven Giegold (Verts/ALE), Blue-card question. – (DE) Mr Langen, are you aware that we have had Community bonds for quite some time already? Are you, furthermore, aware that the resolution refers not simply to Eurobonds, but to a wide range of options? Are you also aware that not all of these options require treaty change? I find it questionable that you should have picked off generalities about Eurobonds alone once again. The very differentiation that we have achieved here thanks to Ms Goulard’s sound proposal is not something that we should give up again. I would like to hear a little more differentiation in your speeches and I am eager to hear what you have to say in that regard.

  Werner Langen (PPE), Blue-card answer. – (DE) I am aware of this. I am, in fact, the rapporteur for project bonds in the Committee on Industry, Research and Energy. Of course, there can be joint European bonds for investments via the European Investment Bank. That is the reality. What we are talking about here, however, is the assumption of common debt, which has hitherto been expressly forbidden under the Treaty. Mr Giegold, there is no need for lectures here. If we want to put in place a common stability bond, the conditions for that must first be met. I said no more and no less than that, and I cannot see a contradiction here.

  Elisa Ferreira (S&D). – (PT) Mr President, Commissioner, between May 2010 and now we have seen how a problem that appeared manageable has spiralled out of control. It is true that combating the crisis caused by the financial markets has further indebted the countries of the euro area and that the weakest have become particularly vulnerable. However, is it possible that countries sharing the same currency are to be left to the mercy of attacks by financiers and those who make money by betting on the likelihood of euro area countries defaulting? The terrible consequences of the inability to respond in the Council and the Commission have produced problems that are today indisputable. The speculative interest rates demanded of individual countries have undermined any strategy for emerging from the crisis. The resulting intensification of the country’s economic problems justify interest rates ballooning further until the country’s economy is killed by credit being totally cut off, with contagion doing the rest. For a long time, this Parliament has been proposing a form of joint management of sovereign debt, subject to tough, but clear, rules.

We welcome the fact the Commission has finally produced a Green Paper on the subject, using the name ‘stability bonds’. Today it is clear that, without bonds of this type, properly linked to the European stability mechanism, the so-called ‘crash barriers’, the sovereign debt firewalls, are non-existent; until they exist, the euro is in danger, as is Europe.

In the resolution adopted by the majority in Parliament on a new treaty, it was totally clear that it is unacceptable to continue imposing more fiscal stability rules, budgetary discipline and sanctions on euro area countries without taking concrete and urgent steps towards the joint management of sovereign debt. The two processes have to develop in parallel. This is what we expect from the Commission and it is already long overdue.

IN THE CHAIR: ISABELLE DURANT
Vice-President

  Jaroslav Paška (EFD). – (SK) Madam President, I understand the efforts made by highly indebted EU Member States to help themselves by financing their public debt with bonds, repayment of which would mainly be the responsibility of others. However, the economies of each state are the sole responsibility of their respective governments. I therefore understand the caution of those governments that still have no difficulty in borrowing at a reasonable premium on the financial markets, as they do not wish to drag their countries into the dubious game of responsibility for the financial mismanagement of others.

If common stability bonds seem as beneficial an idea to the Commission and some Member States as they state in the Green Paper, they should now consider issuing common bonds for the group of countries that see a way out of the crisis in such a solution. We would all, for example, certainly watch closely the level of financial market interest in an issue of common stability bonds by a group of countries from southern Europe – Portugal, Spain and Cyprus – and the premium at which they would trade on the markets. If the premium was at the level of Germany’s, I would say that this solution might be beneficial for the European Union.

  Theodor Dumitru Stolojan (PPE) . – (RO) Madam President, I firmly believe that the single market will also include the single common bond market in the future. However, the question is: when exactly in the future? In this case, it would have been good to have had a political union, but we do not. Therefore, I believe that we must all recognise that Member States need, first and foremost, to regain their credibility on the financial markets through tangible results achieved by implementing the new European legislation and the agreement which is in the process of being signed on economic governance and financial stability. We talk a great deal about solidarity, which is a strong European value. However, we cannot, at any rate, allow it to be extended to some Member States having to finance the excessive spending of other Member States and at a low cost.

We must also recognise that, whether we want to do it or not, Member States will pay from now on – as they also do at present – variable rates of interest and costs for the loans they obtain, as long as their credibility varies on the financial markets.

  Othmar Karas (PPE). – (DE) Madam President, ladies and gentlemen, this is not a general debate about the economic crisis, it is a specific debate about the Commission’s response to the Green Paper consultation. The response to the consultation, Commissioner, is something that you have withheld from us today. We do not know the response to the consultation. In the Green Paper, you put forward three variants. Today, however, you did not come down on the side of any of the three and we are now at the point where we need to get a move on.

We know the problems but we also know that the euro area – any currency area – is also a bond market. We also know that, before Eurobonds can be introduced – although there are many that we are thinking about today – there needs to be a consolidated budget. We have a long road ahead of us in that regard. I only have to think of the debate about the six-pack, of the fiscal pact, to get the feeling that the Member States are not yet at the stage to enable us to actually Europeanise the things we need.

Irrespective of this, you can also help speed things up with specific proposals – in which regard Mr Langen is absolutely right to say that, for two of the variants, we do, of course, need a treaty change – with specific variants, with a specific road map. We need Eurobonds, we need money and we need lower interest rates. We therefore need to move along that road more quickly than was apparent from your speech today.

  Alfredo Pallone (PPE). – (IT) Madam President, after voting on the fiscal compact and the six-pack, and after beginning a debate on compliance with the rules by everyone, we are coming to the realisation that there is no coherent position either within Parliament or within individual governments. We cannot avoid this fact.

The first and second options of the Green Paper cannot be mutualised for a very simple reason, and that is that the guarantee is shared by all the Member States and therefore – as many have already mentioned – this gives rise to a moral hazard.

We have to work on the third approach, if we want to take action quickly and immediately. This means that there would be no mutualisation of the debt, and we cannot work on this because I believe that it is also ethically right that we should not be able to touch on a problem that was decided with the Maastricht Treaty.

In this case the debt in the form of Eurobonds would be made up of the best assets, and therefore this option is feasible and can be carried out swiftly by using, as I said, the best assets and the safest assets by means of liquid and gold reserves. I think that it is the only way forward at the current time – in other words, working on the third option of the Green Paper, because we would be hypocrites if we wanted to work on the first two in order to speed things up.

Later on we will need to agree on the names of these Eurobonds, so whether they are senior Eurobonds, junior Eurobonds, and so on, but at the moment we have a pressing problem, which is that of economic stagnation. Either we take immediate action or the countries that need it will go into recession.

  Rodi Kratsa-Tsagaropoulou (PPE). – (EL) Madam President, the Commission’s proposals on stability bonds come in the wake of initiatives and exhortation by the European Parliament and I therefore warmly welcome this approach. However, I should like to clarify that our objective is not to painlessly resolve the problems of certain countries which are unable to address them on their own. The objective is effective, fair and solidarity-based debt management, without burdening the healthy countries and without certain other countries being forced to provide finance on what are, for them, very onerous terms. The objective is to stabilise the euro area itself and I am sure that the Union will proceed in that direction.

I should like at this point to put certain questions to the Commission:

Firstly, how have the Member States reacted and how have financial associations reacted to the Commission’s three proposals?

Secondly, how does the Commission expect stability bonds to help strengthen the euro on the international markets and, thirdly and lastly, what timetable does the Commission have in mind, given that the countries under fiscal pressure have urgent and imperative needs and, at the same time, must finance their economy in order to achieve growth and cohesion, not only at national level, but also at Union level?

  Markus Ferber (PPE). – (DE) Madam President, ladies and gentlemen, we need to be a little bit more honest again in this debate. What was the situation like before the euro was introduced? What were the interest rates like in Greece when it still had the drachma? What were the rates in Italy when it had the lira, or in Spain with the peseta and Portugal with the escudo? They were considerably higher than what has to be paid on the financial markets at the moment. Those Member States within the euro enjoyed the sweet poison of low interest rates for a decade, and pursued a spending policy that they are no longer on top of. For them to now say that they want to continue to enjoy that sweet poison via the introduction of Eurobonds is precisely the wrong reaction to have. Many mistakes were made here in the past that now need to be corrected. Anyone who believes that this problem would be solved by making the drug that is low interest rates available on a sustained basis would be taking away the pressure that, thank goodness, is currently being applied to a number of Member States by the financial markets.

As a second issue, I would point out that Europe would not be made healthy where the result of Eurobonds would be not to make the sick healthy, but to make the healthy sick. That is why we need to be honest on this issue, too. Eurobonds would not strengthen the European Union, they would weaken it.

Then we have the craziest proposal of all in this resolution, namely to engineer a kind of self-funding reduction of debts through new debts via a redemption fund. What world are we living in? In real terms, what that means is that the debts that countries have run up would be refinanced thanks to the creditworthiness of others, with the costs being borne by those who kept their finances in order in that they have to pay higher interest rates for those who failed to do likewise. That is the communitarisation of debts. Anyone introducing this as a policy instrument endangers Europe much, much more than what we have currently put in place in connection with the rescue packages. I can therefore but warn against acting as if Eurobonds would enable us to solve all our problems.

(The speaker agreed to take a blue-card question under Rule 149(8))

  Sylvie Goulard (ALDE), Blue-card question. – (FR) I fully understand your desire not to withdraw the pressure of balanced interest rates, but it bothers me that you use the words ‘good’ and bad’ so often. In my opinion, given the current situation it makes little difference whether the management has been good or bad. What do you propose doing to enable the countries that have made certain commitments to be able to fulfil them from now on and to ensure that the euro area as a whole thus stands firmly united?

  Markus Ferber (PPE), Blue-card answer. – (DE) Ms Goulard, I will just say, briefly, that that is not a judgment that I have put forward here. I would just point out that the last government bonds issued by Italy before it joined the euro bore an interest rate of 10%. There was no outcry in Italy at the time. Nobody said that other countries should take on the debt. It was natural for Italy to pay high interest rates. Yet now, all of a sudden, because we have had low interest rates for 10 years and got up to our ears in debt, because money was cheap – for investments just as for the public purse – we want to prolong that through Eurobonds. That represents a trap from which we will not escape, and I stand by what I said.

Catch-the-eye procedure

  Roberta Angelilli (PPE). – (IT) Madam President, along with the tax on financial transactions, stability bonds are the only concrete proposal that has emerged in recent months in order to be able to return to speaking about growth and development, and not just rigour and austerity.

We need resources to restore oxygen to the European economy and, in order to restore faith to the market, consumers and businesses, we need a new shared economic, fiscal and financial project. We need new projects to support employment and fight against youth unemployment. Or do we think we can solve all our problems with the EUR 82 billion – announced with so much media hype during the last European Council – which are nothing other than structural funds that have not yet been used by Member States? I believe we all know that we cannot carry on speaking just about sacrifices and cuts to the people of Europe.

To sum up, I would like to address my German fellow Members. I think that at the moment no one can save themselves without help and therefore if stability bonds are not the cure, Germany will also have to take care, because if the crisis spreads then this well-behaved country will also have to pay the cost.

  Miroslav Mikolášik (PPE). – (SK) Madam President, I consider the idea of introducing stability bonds to be premature in the context of the unresolved sovereign debt crisis and deficits in many European Union Member States. The issuance of common bonds, which some consider a ‘potentially powerful tool to address liquidity constraints in several euro area Member States’ would, in my opinion, only draw attention away from the acute and unresolved fiscal discipline problems.

The crisis requires implementation of, and strict adherence to, an adequate fiscal framework, and the concurrent revival of economic growth. The common continuation of public indebtedness would only deepen the current negative situation. Although some negative effects would be delayed and masked in the short term, the core problem, however, would remain unchanged. The introduction of commonly issued stability bonds would also radically change the structure of the euro area sovereign bond market and would introduce new and as yet little scrutinised risks for Member States.

  Anneli Jäätteenmäki (ALDE). – (FI) Madam President, Parliament is now adopting an initial position on Eurobonds, based on a Commission proposal that presents various alternatives. The matter of Eurobonds is political. Eurobonds are a major leap towards federalism. This is the issue, and I myself do not support federalism.

Another reason why I am not in favour of Eurobonds is that they will allow Member States to continue to accrue debt irresponsibly, and this of course is the very thing that we need to be free of. In future, Member States should only be liable for their own debts.

Finally, I would like to say that now, while there is unrest in Athens, the European Parliament is obsessed with the idea of Eurobonds. I think that priority should be given to employment, growth and the creation of jobs.

  Ildikó Gáll-Pelcz (PPE). – (HU) Madam President, Commissioner, now that common economic governance has been established, keeping it stable is clearly a goal for all Member States, and I therefore support both the motion for a resolution and the introduction of stability bonds. So much is certain. From this point on, however, all I have for the Commissioner is questions – both in respect of the introduction of the system and the Member States intending to join. Commissioner, you gave a general introduction, for which I am very thankful to you. I understand that you are in an extremely difficult position having to stand in for Commissioner Rehn; however, I cannot look past the fact that this issue has gone far beyond the point where a general introduction is needed. At this point we should be discussing the specifics. The green paper contains two important elements in respect of the introduction of these bonds: budgetary discipline and the matter of increasing competitiveness. Are there any other requirements for issuing such bonds? It is also unclear how Member States that are not part of the euro area will be able to join. A roadmap – a specific one, not a general one – would be welcome. I would appreciate your response in this matter.

  Anna Záborská (PPE). – (SK) Madam President, I am not a financier, I just want to employ some common sense. I would like to ask a question: do any of the proponents of stability bonds recall what the cause of the mortgage crisis was in the US? Financial institutions created packages for investors which included mortgages of varying quality. These collateral bonds were supposed to spread risk in the event of a default on mortgage payments. They came about as a result of a political order in the shape of an endeavour to provide every citizen with a loan for a house, regardless of financial capabilities.

This is no different to what we now call stability bonds. It is a political endeavour to make more loans accessible to those who cannot repay them. Even the strictest financial discipline rules will fail if they are not enforceable. In the case of mortgages, the lender can claw back part of the loan by selling the property. In national sovereign debts this option does not exist. I believe that the risks associated with Eurobonds have not been sufficiently taken into account.

  Inês Cristina Zuber (GUE/NGL). – (PT) Madam President, the euphemistic way ‘Eurobonds’ are being called stability bonds is founded upon a prerequisite that we reject: the deepening of economic and budgetary governance will result in a marked transfer of sovereignty to the major powers. The strategic objective adopted here is not economic growth, job creation and combating social inequality, but the establishment of the euro as a global reserve currency, an element which goes against the interests of the people of the outlying countries. This mechanism does not guarantee the end of speculative attacks and retains differentiation in the interest rates each country pays for finance. There is no need for measures that could, years ago and in the framework of debating a profound change in European Union economic policy, have served to dampen speculative shock. What is required at this time is to reverse the path taken and repeal economic governance, the Euro Plus Pact and the fiscal compact.

  Elena Băsescu (PPE). – (RO) Madam President, according to the Commission’s annual analysis for 2012, economic recovery in the EU is going through a period of stagnation, and economic growth is forecast this year to reach only 0.6%. The deepening of the sovereign debt crisis in the euro area is worrying. In view of this, common bonds could provide an effective tool for resolving liquidity problems. They mark a step forward towards common fiscal sovereignty between euro area Member States. Issuing stability bonds could also help provide funding at lower costs. This would have a positive impact on national markets.

The EU must devise economic and budgetary supervision measures for countries faced with severe financial instability. It is important for budgetary discipline to be enhanced.

End of the catch-the-eye procedure

  Neelie Kroes, Vice-president of the Commission. − Madam President, this is quite an experience: 22 people are on the list to speak and there are only 5 in the Chamber. I am saying this by way of response to the remark of Honourable Member Werner Langen, who mentioned that 18 reactions to Olli Rehn’s speech was quite a low number. I could not agree more, but his reaction and his conclusion on that number was that the Commission did not do the job properly. I do not accept that conclusion.

Olli Rehn is doing a great job. He could not be here today, but I can assure you he has to be active in the solution for Greece. Having said that I think that it is quite remarkable that as I began my speech Mr Bloom was saying ‘I have to go’, ‘I am hungry’. This type of reaction is not in keeping with the importance of the issue we are dealing with.

I am more than willing to do the job and to give the answers that I have available on this subject. The subject is too important not to reply in full. I completely agree and, therefore, arguments in favour of pursuing Eurobonds are clear. Stability bonds would provide all participating Member States with more secure access to refinancing, and reduce or eliminate the need for costly support and rescue measures for Member States temporarily excluded from market financing. Stability bonds would enhance financial stability and they would provide the source of more robust collateral for all banks in the euro area.

This would reduce banks’ vulnerability to any deterioration in the credit ratings of individual Member States, and other institutional investors would benefit from a more homogeneous and robust safe asset. But stability bonds are not a measure to address the current crisis. They are the next step in EU integration and a tool to limit the risk of future crises. Stability bonds can make the euro-area financial system more resilient to future adverse shocks and so reinforce financial stability.

We also need to be clear about legal, technical and political challenges. For example, the issuance of stability bonds under joint and several guarantees would, a priori, lead to a situation where the Article 125 ban on bail-outs would be breached. In this case, an amendment to the Treaty would be necessary. I do not need to explain to you the likelihood of success of such changes in the current circumstances.

In so far as the introduction of stability bonds will increase the pooling of risk between participating countries, this might have the effect of weakening market discipline. This means that it is of crucial importance that all participating Member States have confidence in other participants’ economic and budgetary policies, and thus a higher degree of control over each other’s policies.

Therefore, an increase in surveillance and in intrusiveness in the design and implementation of national fiscal policies would be warranted beyond the recent initiatives, and by that I am talking about the six-pack, the fiscal compact treaty and Article 136 regulations proposed by the Commission. The very existence of stability bonds could fundamentally alter budgetary processes, notably via the allocation mechanisms.

The participating Member States would collectively decide and approve individual budgetary plans through the allocation of bonds. All these issues require careful further reflection. The Commission will therefore continue seeking the views of key stakeholders in this respect and will therefore consult, in particular, Member States, financial market operators, financial market industry associations and academics within the EU and beyond. Once sufficient clarity has been established on all those issues, the Commission will give its views on the appropriate way forward.

I sincerely hope that those who remain in the Chamber and who are interested in the debate can accept this response in the name of Olli Rehn.

  President. – In accordance with Rule 115(5) of the Rules of Procedure, I have received one motion for a resolution⁽¹⁾.

The debate is closed.

The vote will take place on Wednesday.

Written statements (Rule 149)

  George Sabin Cutaş (S&D), in writing. – (RO) I think that the risks facing Member States on the financial markets need to be pooled. In a situation where France is facing the threat of having its rating downgraded by credit rating agencies and Germany was faced a few months ago with increased problems in financing itself, refusing to implement Eurobonds will clearly only exacerbate the current situation for all EU Member States. Creating a single Eurobond market, while also setting targets for reducing Member States’ debts under the supervision of the European executive, would help make the euro more stable, increase liquidity and achieve significantly lower interest rates. A single currency cannot operate without a common bond market and a common fiscal policy. In fact, the euro has the potential required to become a global reserve currency. Against this background, I welcome the initial proposal from the European Commission on stability bonds. Following consultations, it must quickly present a road map for launching this tool.

  Monika Flašíková Benová (S&D), in writing. – (SK) The Green Paper on the feasibility of introducing stability bonds assesses the feasibility of the common issuance of sovereign bonds among euro area Member States and the conditions required. Sovereign issuance in the euro area is currently conducted by Member States on a decentralised basis, using various issuance procedures. The introduction of commonly issued stability bonds would mean a pooling of sovereign issuance among the Member States and a sharing of associated revenue flows and debt-servicing costs. This would significantly alter the structure of the euro area sovereign bond market, which is the largest segment in the euro area financial market as a whole. The intensification of the euro-area sovereign debt crisis has triggered a wider debate on the feasibility of common issuance. A significant number of political figures, market analysts and academics have promoted the idea of common issuance as a potentially powerful instrument to address liquidity constraints in several euro area Member States. The common issuance of Stability Bonds would also require a further move towards a common economic and fiscal policy. The Commission should declare the preliminary results of the consultations on stability bonds mentioned in the Green Paper, and on the further steps it plans to take based on the public consultation on its Green Paper. I am personally of the firm opinion that the introduction of common bonds is one of the key points in combating the current crisis. I therefore hope that decisive steps will be taken in this direction.

  Andreas Mölzer (NI), in writing. – (DE) Instead of helping Greece from the start by having it exit the euro and achieve rapid consolidation through a European Marshall Plan, a vicious circle of debt, recession and hunger for credit was created, attempting to relegate Greece to the status of a permanent recipient of financial aid. Many before have lost house and home playing that game. At EU level there is much more at stake. Here, whole states and the debt burden of future generations are on the line. Yet, while casinos have the ability to bar people, Brussels wants to open the doors wider to gambling addicts. Eurobonds are nothing more than a public invitation to raise fiscal policy sloppiness and the communitarisation of debt to a new level. Of course, the bankrupt states in the euro would rather tap the financial power of the net contributor states – thus in particular Germany, the Netherlands and Austria – than to bring their own budgets into order. When, in the casino of European sovereign debts, the alarm is ringing, it is not acceptable that we should then simply use Eurobonds to switch off the flashing lights and allow the crisis-hit countries to assume even more debts than they could ever repay. The further communitarisation of debts through Eurobonds must be vigorously rejected. Instead, the EU should take new paths such as a European hard currency union.

  Sirpa Pietikäinen (PPE), in writing. – (FI) I would like to thank the Commission for giving tangible shape to the debate on Eurobonds; the Green Paper on stability bonds is an excellent start to that debate. The idea of common euro area bonds must be properly examined as one component in the Union’s future financial architecture, especially as a method for increasing the stability of European public debt financing and to reduce interest charges, and as a boost to the economy. The approach should, above all, be a pragmatic one: with adequate guarantees of good financial discipline, a common bond would reduce everyone’s debt service costs. Without them, we would be sharing the risks for the wrong reasons.

Common European bonds will also be seen to bring other benefits. Lower and steadier interest rates on the debts of countries in the system and making it harder to speculate using the bonds of individual countries are issues we hear time and time again in debates. The argument that common bonds have greater liquidity has, in particular, been used to support the idea that the system would also be useful for ‘good payers’, which would still be countries judged to be in the lowest possible risk category. It is mainly the smaller countries with AAA credit ratings, though also Germany, which have been thought to benefit from a large, more liquid bond market. Common bonds would compel Member States to coordinate their financial policies more closely.

Both those who oppose the system and they who support it have valid reasons for so doing. I myself think that the benefits to be gained from Eurobonds will, in the end, be greater, as long as we ensure that the system’s rules and structure are imposed in the right way.

(1) See Minutes