The European Commission is drafting a proposal to bundle some debt of the euro-zone states into a new financing instrument called “European Safe Bonds,” according to information obtained by Handelsblatt.
The goal of the bonds would be to reduce the risk of member states going bankrupt or contagion spreading through banks. The commission aims to publish a white paper on the subject in March.
But opposition is already building in Germany. The finance ministry’s advisory council warned Finance Minister Wolfgang Schäuble in a letter that the proposal amounts to implementing “eurobonds through the backdoor.”
Potential investors – financial giants like BlackRock, Morgan Stanley and Goldman Sachs – are also skeptical.
The German government has already signaled to Brussels that it opposes the proposal, according to E.U. diplomats.
But the European Commission apparently has the support of the central bankers who will publish a report two days before the commission’s white paper.
According to Handelsblatt information, the experts support the idea of safe bonds, much to the frustration of some E.U. member states, who believe the central bank has no business helping the commission create new instruments for state financing.