EU spells out future eurozone bond-issue option

The EU will this week urge eurozone states caught in the debt crisis turmoil to club together to guarantee each others debts, vowing to police national budgets ruthlessly by way of a safeguard.The European Commission will on Wednesday publish legislative proposals to implement common eurozone bonds that could start with a club-within-a-club and only partial debt-pooling.That amounts to a direct challenge to the EUs most powerful economy Germany to open the door to radical cross-border integration of public finances.Berlins status as Europes safe pair of hands means it currently pays half the interest on its borrowings as number two eurozone economy France, and massively less than Italy or other big partners in trouble over their debts.Without governance across borders to ensure similar good housekeeping elsewhere, Berlin has consistently opposed any move to put up a permanent umbrella for currency neighbours.Michel Barnier, EU internal market commissioner, spoke out on Sunday in favour of eurobonds, but with some kind of common governance as a precondition to the bonds.The condition to these common eurobonds, to share debt -- which seems to me a fair idea -- is to have common coordination, surveillance and governance, he told French media.For eurobonds to be effective, Europes budget -- which currently only represents a tiny one percent of European GDP -- would need to be increased, said Barnier.Among a range of options, the Commission envisages an evolving system of Stability Bonds that could bring down yields for those under the most pressure relatively quickly, documents showed Sunday.The proposals will be presented in tandem with plans to allow Brussels technocrats to intervene in the writing of national budgets.They have been designed to combat nearly two years of eurozone turmoil after bailouts for Greece, Ireland and Portugal, and with even France now facing mounting pressure going into a presidential election year.