UPDATE 2-Germany rejects "E-bond" and euro safety net top-up

* Germany sees no need to boost euro zone safety net

* Also rejects “E-Bond” idea proposed by Juncker, Tremonti

* Says Eurogroup will send “joint signal for more stability”

(Adds quotes, background)

By Andreas Rinke and Paul Carrel

BERLIN, Dec 6 (BestGrowthStock) – Germany on Monday rejected the
idea of increasing the size of the European Union’s safety net
and ruled out a proposal to issue a joint euro zone bond, but
said it stood squarely behind the single European currency.

Chancellor Angela Merkel cited legal obstacles to the
issuance of a joint sovereign bond, or “E-bond” — an idea that
was refloated jointly on Monday by the chairman of the Eurogroup
of euro zone finance ministers and Italy’s finance minister.

Instead, Merkel called on European governments to implement
tougher budget rules to prevent countries living beyond their
means, guarding against the fiscal indiscipline that Germany
sees as being the root cause of the euro zone debt crisis.

“The treaty does not in our firm view allow any euro bonds,
so no uniform interest rate,” Merkel told a joint news
conference with visiting Polish Prime Minister Donald Tusk.

Countries would have a greater incentive to comply with the
EU’s fiscal rules, enshrined in the Stability and Growth Pact,
if they each had to pay interest on their own debt, she said.

“It is important that innovations to the Stability and
Growth Pact are implemented as these guarantee that in the
future we will not have a situation like we had in the past,”
Merkel added.

Europe needed the euro, Merkel said, and Germany would do
everything to ensure the single currency was strong and safe —
comments echoed by government spokesman Christoph Steegmans.

“Germany feels committed to the euro, like all member
states,” Steegmans said. “In a nutshell, if the euro fails, then
Europe fails — that is the position of the whole government.”

“The government stands squarely behind the euro and its
stability, we have never let there be any doubt about that,” he
said, adding: “I want to stress that Germany has a great
interest in the stability of the euro growing.”

EUROGROUP “SIGNAL”

Euro zone finance ministers, who meet in Brussels later on
Monday, face pressure to increase the size of a 750 billion euro
($994.5 billion) safety net for debt-stricken members in order
to halt contagion in the single currency bloc. [ID:nLDE6B40EJ]

Steegmans rejected this idea, telling reporters: “We see no
reason at all at the moment for an increase in the size of the
euro rescue shield — no reason at all.”

But he suggested the meeting may produce tangible results.

“The meeting of the Eurogroup today … will give a joint
signal for more stability and confidence,” he said.

Wide differences remain in the 16-nation single currency
area over how to overcome a debt crisis that has already led to
EU-IMF bailouts for Greece and Ireland, and now threatens to
spread to Portugal, Spain and possibly Italy.

Jean-Claude Juncker, chairman of euro zone finance
ministers, and Italian Finance Minister Giulio Tremonti made a
joint case in Monday’s Financial Times for a joint sovereign
bond, or “E-bond”, to send a signal to markets and citizens of
“the irreversibility of the euro”. [ID:nLDE6B40HG]

Steegmans, echoing Merkel, ruled out the “E-bond” idea.

“The government rejects euro-bonds not just on economic
grounds but also because that would require considerable treaty
changes,” he said.

(Additional reporting by Annika Breidthardt and Erik
Kirschbaum; Editing by Ron Askew)

UPDATE 2-Germany rejects "E-bond" and euro safety net top-up