Eurozone crisis

A war of words erupted Wednesday between Germany and Eurogroup leader Jean-Claude Juncker over eurozone crisis discussions.

The row has been brewing since Monday, when Germany flatly rejected on legal and economic grounds a proposal by Juncker for joint eurozone bonds.

In an article to be published Thursday in German weekly Die Zeit, Juncker labeled the German reaction as "un-European," and attacked the government of Chancellor Angela Merkel for not taking a proper look at his proposal - aimed at helping weaker eurozone countries like Greece, Ireland and Portugal raise money.

"They are rejecting an idea before studying it ... This way of creating taboo areas in Europe and not dealing with others' ideas is a very un-European way of dealing with European matters," said Juncker, who is also Luxembourg's prime minister.

"Germany is thinking a bit simple on that," he added.

The joint bonds - or E-bonds - could help eurozone members seen as having unstable public finances lower their borrowing costs. As it stands, the interest that weaker eurozone states must pay out on government bonds stands at more than double - and sometimes triple - the interest paid by stronger members, such as Germany.

It is believed such high interest rates for Irish and Greek bonds contributed to both countries having to seek huge loans from the EU and International Monetary Fund recently - 110 billion euros and 85 billion euros respectively.

German reaction

Merkel retorted to Juncker's comments on his E-bond proposal by saying his words were causing unease on world markets. The yield on a 10-year German government bond recently shot up to 3 percent from 2.4 percent in early November.

"It doesn't help anyone in Europe if European figures call each other un-European," commented Merkel's spokesman Steffen Seibert in a regular government briefing.

"It is exactly this talking against other people and about other people which should stop, because the markets definitely see this finger-pointing as a sign of discord."

"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.

Merkel herself called for "calm" ahead of an EU leaders' summit next Friday, where talks will focus on creating a permanent crisis mechanism for the eurozone and what the chancellor called "narrow" changes to EU treaties.

"I think that we should work in a calm and goal-oriented manner towards what awaits us next Friday. This calm manner is my contribution to making sure we are successful next Friday," Merkel told reporters.

Author: Darren Mara (Reuters, AFP)
Editor: Susan Houlton