Bonds and eurobonds – a resolution will be needed to restart capital markets
It isn’t often that the creation of a new financial instrument makes front-page news. But then it isn’t often – even post-banking crisis – that global markets and public finances become so strained that discussion of the euro’s break-up becomes a mainstream topic. Amid a summer of financial turmoil, with Greece teetering on the edge of a messy default and European leaders so far failing to come up with a credible rescue plan to deal with struggling national economies and banks, European Commission president Jose Manuel Barroso made headlines by suggesting that a common eurozone bond was the best option on the table. It’s not a new refrain. While the idea for a euro-area bond, which would allow weaker countries access to cheaper borrowing, is nothing new, until recently such a move seemed a near impossibility because of the lack of European Union institutions to implement it and entrenched opposition in stronger economies to bailing out profligate southern member states.
Eurozone bonds an unlikely short-term saviour but deeper ties needed to crack problems