Joint eurozone bonds could help the bloc overcome its debt crisis, Greek Prime Minister George Papandreou said on Friday. Greece, which clinched 110 billion euros ($148.9 billion) in emergency EU/IMF funding in May last year to avoid default, embraced the common euro bond proposals put forth by Eurogroup chairman Jean-Claude Juncker and Italian Economy Minister Giulio Tremonti.
"Euro bonds can contribute to financial stability and be a complementary tool to deal with the debt crisis," Papandreou, a strong advocate of the joint bonds, told a conference. "It is a pity for Europe not to have such a strong tool." But Berlin and Paris have opposed the idea, arguing that issuing euro bonds at a common interest rate would raise their own borrowing costs and remove a key market incentive for fiscal discipline in countries with high debts and deficits.
Papandreou argued on Friday that euro bonds would help convergence within the single currency area. "Without ignoring moral hazard issues, we have to explore measures so countries like Greece and Iberia (Portugal and Spain) can borrow at moderate rates and not with such huge variations in borrowing costs from other countries on the same continent," he told an economic conference in Athens. "I'm glad the discussion on euro bonds is going ahead. If this is done properly it can respond to the needs of the entire eurozone.
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