Belgian PM Leterme proposes European Debt Agency

BERLIN, March 5 (BestGrowthStock) – Belgian Prime Minister Yves
Leterme proposed on Friday a common finance ministry or debt
agency for the euro zone to tackle problems highlighted by
Greece’s debt crisis.

Without naming Greece, Leterme wrote in an article published
in Financial Times Deutschland that “the latest tensions in the
market for European government debt” exposed the problems of a
currency union without a common economic government.

Leterme described the European Union’s Stability and Growth
Pact, which is supposed to regulate countries’ budget deficits,
as a provisional solution.

“I suggest going a step further and founding a common
finance ministry or a European debt agency for the euro zone,”
he wrote, saying this could be known as the European Debt Agency
(EDA).

The EDA would be responsible for the issue and
administration of government debt in the euro zone, and would
rank below national financial ministries.

“The EDA would take over the existing debt instruments and
issue new ones, as far as Ecofin … and the euro group gave its
approval. These means would then be transferred to the member
states,” he wrote.

For existing debt, member states would continue to pay
varying interest rates corresponding to their credit ratings.
When old debt of individual nations matured, it would be
replaced by common debt of the euro zone.

“This would imply that every member state would implicitly
guarantee the debt of other countries,” he wrote.

Doubts over Greece’s ability to service its debt have led to
turbulence on euro zone markets, and provoked fears that
investors may lose faith in debt issued by other governments in
the bloc which are struggling to control their budget deficits.

European Socialists proposed on Tuesday setting up an
emergency fund to prevent defaults by euro zone countries such
as Greece that run into trouble, but there has been scant EU
appetite for radical institutional reforms. [ID:nLDE62111Q]

Diplomats say Greece might be offered a one-off bail-out
scheme, but far-reaching, systemic reforms, such as setting up a
“European Monetary Fund” or creating an economic government for
the euro zone or the EU, are unlikely.

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(Editing by Toby Chopra)

Belgian PM Leterme proposes European Debt Agency