Barosso backs eurobond rescue plan

Joint eurobonds issued by the 17 euro nations are being backed by European Commission president Jose Manuel Barroso as a solution to the financial crisis, putting him on a collision course with German Chancellor Angela Merkel.

Mr Barroso said the plan makes sense if linked to fiscal rigor among the member states sufficiently stringent to make it impossible for profligate nations to live on the back of budget-conscious countries.

Germany has opposed the principle of eurobonds since it would expose its taxpayers to the bad

debt of weaker countries. As Europe’s largest economy, Germany already funds the bulk of the existing bailouts.

However Mr Barroso said he and the Commission “are going to put those ideas forward”.

The Commission said replacing national bonds with one jointly-backed bond would be the most effective way to tackle the financial crisis.

Mr Barroso insisted that any such plan would have to be matched by tight financial and budgetary co-ordination.

Since Greece pushed the eurozone into its ever-worsening financial mess last year, many member states have seen their cost of government borrowing rise to record levels. Germany’s borrowing rates, meanwhile, have dropped sharply as investors buy up its bonds as a safe haven. That has created a huge imbalance in debt markets within a zone ruled by one currency.

Germany has long insisted it was up to individual governments to live by sound economic principles and win investor confidence.

The German government made clear that it was not budging on its opposition to the idea of eurobonds as a quick-fix solution to the crisis.

“The chancellor and the German government do not share the belief of many that eurobonds would be a kind of cure-all for the crisis now,” said Chancellor Angela Merkel’s spokesman.