Forex News – Eurobonds on the Franco-German summit agenda

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German Chancellor Angela Merkel and French President Nicholas Sarkozy are scheduled to meet on Tuesday in Paris to discuss the eurozone crisis. First on the agenda will be the topic of Eurobonds and “fiscal union”, which is a taboo subject for Germany at the moment.

An increasing number of European officials are favouring the idea of Eurobonds and a plan for jointly selling Eurobonds as a way of preventing a euro zone country from going bankrupt.

Italian Finance Minister Giulio Tremonti strongly supports the idea and suggested that Italy would not be in the debt situation they are in now had a communal guarantee of bonds existed.

Some believe that if each EU member country government could give up national control on budgets and have a U.S. style fiscal union, it may have prevented the European debt crisis that began in Greece in late 2009 which has resulted in 365 billion euros ($521 billion) in emergency bailout loans.

The immediate plan now is to relieve the European Central Bank’s job of bond-purchasing and introducing the new July 21 legislation that gave new powers to the EFSF to purchase bonds on the secondary markets, which each member country has to ratify now.

The issue of joint bonds by the euro zone states aims to shore up the credibility of weaker states by the involvement of stronger ones. However, this has come under fire by Germany as common bonds would mean higher interest rates for Germany.