Germany's opposition Social Democrats criticised the Franco-German summit today for rejecting common euro zone bonds and for failing to offer an adequate solution to the debt crisis.
SPD parliamentary leader Frank-Walter Steinmeier said the proposals made yesterday evening by French President Nicolas Sarkozy and Chancellor Angela Merkel were on the right track but did not offer a solution.
Under heavy pressure to restore confidence in the euro zone following a dramatic market slump, the two leaders vowed to stand side by side in defending the euro and laid the groundwork for future fiscal union.
However, they disappointed investors by declaring that any thoughts of euro bonds would have to wait.
Steinmeier said Ms Merkel was just catering to the junior partners in her centre-right coalition, the Free Democrats (FDP), while Mr Sarkozy was clearly more amenable to the idea.
FDP finance expert Daniel Volk warned on Monday that the coalition could break up if Merkel's conservatives insisted on euro bonds.
"You could clearly hear with the French President that he did not exclude euro bonds," Steinmeier told ARD public broadcaster.
At a news conference yesterday evening, Mr Sarkozy said: "Euro bonds can be imagined one day, but at the end of the European integration process not at the beginning."
Until now, euro bonds have been fiercely opposed by Berlin, which is fearful such a step would push up German borrowing costs and reduce incentives for weaker euro zone states like Greece to reform their economies.
Yet momentum is building up in the debate over the bonds in Germany. Two leading German business groups unexpectedly came out in support of them on Monday, saying that without the instruments there was a risk of a worldwide depression resulting from Europe's debt crisis.
Some members of Ms Merkel's Christian Democrats (CDU) yesterday called for a more nuanced debate about euro bonds
Reuters