UPDATE 1-Germany sees economic, political barriers to E-bonds

Published 12/08/2010, 08:57 AM
Updated 12/08/2010, 09:00 AM

* Germany warns of economic, legal obstacles to euro bonds

* Germany rejects Juncker criticism, says not helpful

(Adds quotes, background)

BERLIN, Dec 8 (Reuters) - Germany believes there are legal and economic hindrances to the introduction of joint euro-zone government bonds which would require fundamental changes to the European Union's underlying treaty, Berlin said on Wednesday.

Chief German government spokesman Steffen Seibert said his country's opposition to the idea, mainly championed by Eurogroup head Jean-Claude Juncker, would not change in the coming weeks, though he reiterated Germany's commitment to the joint currency.

"There are economic and legal problems that are standing in the way of any introduction of euro bonds at the moment," Seibert said. "Nothing has changed in our point of view."

He said there were several legal hurdles in the way and euro bonds would not be possible without fundamental changes of the Lisbon Treaty.

"The introduction of euro bonds would require more thorough changes, in principle a different European structure and we don't see that at the moment," he said. "Thus, the German government remains opposed to the proposal.

"The legal and economic concerns about the euro bonds will remain in place for the weeks ahead," he added.

Asked about Juncker's criticism of Germany's rejection of euro bonds, Seibert said: "In general it certainly doesn't help anyone in Europe when the individual players in Europe call each other 'un-European'.

"I don't think this talking against each and about each other should stop. The markets are taking due note of this disunity," he said.

Juncker was quoted as saying on Wednesday Germany rejected the idea of a common euro zone bond without studying the proposal in detail. Juncker, Prime Minister of Luxembourg, also said Germany had a non-European way of doing European business.

"The proposal is being rejected before it has been studied," Juncker was quoted as saying in an interview with Die Zeit newspaper to be published on Thursday. "Germany's thinking is a bit simple on that." [ID:nLDE6B70UI]

Earlier this week, Juncker and Italian Finance Minister Giulio Tremonti called for the issuance of joint European sovereign bonds -- or E-bonds -- to assert the "irreversibility of the euro".

The plan has come up against strong resistance from Germany, which wants to ensure governments are kept under pressure from bond markets to avoid a repeat of the years of easy borrowing that led to Europe's debt crisis.

A meeting of the group of euro zone finance ministers on Monday ended with no fresh action to stem the currency bloc's debt crisis and Juncker saying that the issue of a common bond had not even been broached.

"Germany stands fully behind the euro," Seibert said. "The euro is more than just money," he said.

(Reporting by Sarah Marsh and Erik Kirschbaum; writing by Stephen Brown; editing by Patrick Graham)

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