Commission prepares plans to introduce euro area bonds
The euro rose the most in a week against the dollar and European stocks surged this afternoon amid optimism the region's debt crisis may still be contained.
The single currency was boosted after European Commission president José Manuel Barroso said he is close to proposing options on joint euro-area bond sales, putting officials in Brussels on a collision course with Germany.
Speaking this morning, Mr Barroso said the commission is preparing options for the introduction of eurobonds. He called for much closer political integration and said the EU needed a "new federalist moment" to confront the most serious challenge for the union in a generation.
Addressing the European Parliament in Strasbourg, Mr Barroso portrayed the current crisis as an existential threat to the European project. "This is a fight for the jobs and prosperity of families in all our member states," he said. "This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world. This is a fight for European integration itself."
His comments helped reverse earlier losses for the single currency and falls in European markets, which had declined for a fifth consecutive day after Moody's downgraded two French banks, Société Générale and Credit Agricole.
Mr Barroso confirmed the commission would soon present options for the creation of common euro area bonds - a path opposed by Germany - as a way out of current crisis.
Some of these options could be implemented within the terms of current EU treaty, but others would require changes to the EU's founding charter.
"The only right way to stop the negative cycle and to strengthen the euro is to deepen integration, namely within the euro area," he said.
"This is the way to go. It is also the only way for the euro area to really play the role that investors and global partners expect it to play. What we need now is a new, unifying impulse – a new federalist moment. Let's not be afraid of the word - a federalising moment is indispensable."
While the commission would put forward the eurobond options, Mr Barroso cautioned that this would not bring an immediate solution. Rather, it needed to be one element in a "comprehensive approach to further economic and political integration."
In a thinly veiled swipe at France and Germany, which have increasingly taken the initiative in tabling proposals for a way out of the crisis, Mr Barroso said the move towards closer integration must follow the "community method", where Brussels is centrally involved. "A system based purely on intergovernmental cooperation has not worked in the past and will not work in the future," he said.
Mr Barroso echoed the concerns of ECB president Jean-Claude Trichet that delays in approving a package of measures agreed in July was adding to current market turmoil. "Solid, feasible and concrete proposals have been made. They have been agreed upon. But they have taken too long and have not yet been fully delivered," he said.
The Stoxx Europe 600 Index gained 1.5 per cent today, and the euro gained as much as 0.5 per cent, the most since September 7th.