German Chancellor Angela Merkel hit back at the idea of creating eurobonds proposed by the European Commission on Wednesday, saying it "will not work" in pulling the eurozone out of current debt crisis.

 

Speaking in a parliamentary debate, Merkel said it is "extremely worrying and inappropriate that the European Commission is changing the focus to such eurobonds" at this moment after she stressed Tuesday that it was not the right time to discuss the establishment of eurobonds, adding that the idea would send a signal that some member states' structural problems could be solved by borrowing more money.

 

Hours after Merkel's speech, European Commission President Jose Manuel Barroso unveiled a set of draft regulations, with an aim to laying a legal ground for tougher supervision and management of eurozone national fiscal policies.

 

The Commission outlined three main options for the so-called "stability bonds," which allowed countries facing debt troubles to obtain emergency financial aid through such a joint issuance. The draft plan did not point out which arrangement is the best option.

 

Echoing Germany's worries, the European Commission also stressed that "any move towards introducing stability bonds would only be feasible and desirable if there were a simultaneous strengthening of budgetary discipline."

 

However, some observers said that Germany, the Europe's strongest economy, still fears that once such eurobonds were issued, the country's hard-earned low borrowing costs would sharply rise, and its financial reputation would be dragged down by other overspending nations.

 

On Wednesday, Merkel insisted on her prescription for the troubled eurozone -- market confidence could only be regained by changing the EU treaties and imposing stricter discipline on heavily indebted countries.

 

She also told German lawmakers that her government would continue to push for the international financial transaction tax, which she believed is the right response to over-speculation and potential financial crisis in the future.

 

Xinhua