EU May Draft Eurobond Legislation Despite Merkel’s Objections

Huge news out of Bloomberg, especially if it winds up becoming true.

According to the New York-based financial publication, European Union regulators may start drafting legislation for a Eurobond to help control the debt crisis, which appears to be spiraling out of control. This is a stark contrast from what German Chancellor Angela Merkel has said in recent days.

Earlier in the week, Merkel and French President Nicolas Sarkozy held a press conference on the European Union financial crisis, and it was nothing short of disastrous. Both said there would be no Eurobonds, thought Sarkozy said that something might happen in future regarding that. Both also said that the European Financial Stability Fund (EFSF) would not be increased. Both were seen as major negatives in the marketplace.

The European Commission said it may start drafting legislation on euro bonds, despite the German objections.

“The report will, if appropriate, be accompanied by legislative proposals,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a written response. “These euro securities would aim to strengthen fiscal discipline and increase stability in the euro area through markets,” wrote Rehn, in quotes obtained by Bloomberg.

The European Union has 17 countries, with France and Germany being the two strongest nations in the union, and Portugal, Italy, Spain, Ireland, and Greece being the weakest. We have talked ad nausea about the problems of Italy, Greece, and the rest of the “PIIGS.” Both France and Germany are rated AAA, while Greece is at junk, and the others could be on their way there.

Merkel again came out today and said “we don’t want that,” in response to Eurobonds. The country would face an additional $67.6 billion in costs if a Eurobond was enacted. It is obvious to see why she and the rest of Germany do not want to do it, but they may have no other choice.

Analysis provided by eToro.