[credit provider=”www.time.com” url=”http://www.time.com/time/covers/0,16641,20110822,00.html”]
This weekend Herman Von Rompuy of the European Council said that creating eurobonds to end the EU’s debt crises would be impossible without fiscal convergence. Similar statements have been made by many, including German Finance Minister Wolfgang Schaeuble, who warned of an “inflation community” if fiscal policies weren’t unified before eurobonds were issued.But there’s no clear picture of what fiscal convergence would look like.
Von Rompy has mentioned that countries would have to have relatively balanced budgets before they could coordinate on policy (that could be a long while). The EU Treaty would have to be amended, as would many of the Constitutions of member nations. At this point, the European Commission is still finishing a feasibility report on the matter.
Then again, maybe “fiscal convergence” is just an excuse for those who don’t want the bonds to be issued.
Angela Merkel made it clear that she’s not keen on them at all. Via the Financial Times: “The markets want to force us into doing certain things, and that we won’t do. …Solving the current crisis won’t be possible with eurobonds and that’s why eurobonds are not the answer.”
Tell us what you think: Is fiscal convergence possible and what would it look like? Or Is this just a distraction from the dreaded eurobond?