Will European bonds translate into Eurobonds?

There are, we are told, no plans to bail out Greece, which has come under a lot of pressure and scrutiny for its government debt. However there seems to be a general feeling that if it came to it, Greece would be bailed out: see the Irish Times and A Fistful of Euros. A few months ago, when the pressure was more focused on Ireland, I had the impression that, in the end, Merkel would relent and accept the need to bail out Ireland to prevent the Euro from being damaged. In terms of the Euro, any state is probably too big to fail, and so there probably needs to be some mechanism for supporting Eurozone states.

If Greece is bailed out by the EU, then there’ll be a strong precedent and expectation to do it again – and it could be called to do so again, as AFoE seems to suggest when you consider its articles on Spain. Of course, it may not come to a bail out, but already the EU is setting precedents through checking the Greek government’s figures and offering advice on the economy. Granted, the EU isn’t yet setting fiscal policy or writing Athens cheques, but it does show a growing need for greater formal economic co-ordination – and a certain willingness to do something about it.

There have been calls for more co-ordination in tax (which would be resisted by Ireland, among many member states).

Also, the Eurobond issue has been raised again, as it was when Ireland was the focus, and with the S&D group coming out in favour of its creation. It would make borrowing cheaper for countries like Ireland and Greece, but more expensive for countries in a better position, which in political terms looms large as Germany. Germany rejected the idea back when Ireland was the issue, and Berlin remains an obstacle to the idea. But if idea proves resilient and keeps coming back – as it probably will during what will likely be a long recession, and particularly if Greece does need to be bailed out – it could happen. Is it a necessary element of a stronger Eurozone?

The S&D group is also advocating the EU adoption of Obama-like plans for the banking sector. Given the UK’s unease with the prospect of financial regulation at a European level in the guise of a simple oversight system, and the dominance of the right generally, it isn’t really a serious prospect. Except... It is interesting that in the UK the Conservatives have, strangely, enthusiastically adopted Obama’s ideas and David Cameron has called on the Prime Minister to clearly come out publicly in favour as well. I doubt they adopt the same position in the EP.

Could Gordon Brown turn around and say, “Why, yes, of course we support such a plan – and we’re part of an EU-spanning political party that advocates it too. Given the international value of banking, and the single market, it would make sense to have common rules on the matter – and we’re the only party in the UK that has the political clout in Europe to make it happen.”? Well... no. Besides Britain’s euroscepticism and the government’s continued awe of the City, it would be too risky to support it at a European level because the S&D are in opposition, so there’s no guarantee that it would pass in the EP, never mind in the Council and Commission; the Commission, which would need to introduce any draft legislation on the matter, may not back the idea; it could end up playing as a victory for the French and a result of their “winning” an economic portfolio, even if it was originally Obama’s idea, etc.
Pity: the thought of Labour turning its European-dimension to its advantage on an issue (to show coherence and effectiveness on several levels compared with the Tories) is a nice thought, but still a fantasy.

Will European bonds translate into more co-ordinated action and a more structured way of working together in the future? Necessity might demand it, but there may not be the supply of political will.