After last week’s German bond auction sent shockwaves through the international markets the eurozone will face a challenging week with four key countries holding bond auctions. Belgium, France, Italy and Spain will sell bonds over this week with a combined EUR 17 billion target. The auctions will test market confidence in eurozone debt and follows a tough week, when the worst ever German bond auction fell far short of its USD 8 billion dollar target. Whatever the outcome the debate on the political response to the debt crisis, at both a national and an EU level, looks set to continue.

Speaking in Italy on Friday (25 November), European Commission Vice- President, Ollie Rehn (in picture), again raised the idea of issuing euro bonds. “On Wednesday the Commission presented [also] a consultative document – a Green Paper in our jargon – on eurobonds, or stability bonds. While the prospect of introducing stability bonds could help alleviate the sovereign debt crisis, stability bonds alone will not solve the crisis.” he said.

This came a day after German Chancellor Angela Merkel rejected eurobonds and Rehn raised the question of the economic independence of member states, “For me, it is clear that any type of common bond issuance, which implies a further sharing of risk, would have to go hand in hand with a substantially reinforced fiscal surveillance and policy coordination. This would have implications for fiscal sovereignty, which calls for a substantive debate in Member States.”

In his speech, given at the Parliamentary Hearing with European and Budget Committees of the Chamber of Deputies and of the Italian Senate, Rehn explained the Growth and Governance pact, which came into force Wednesday, November 23 , and outlined a series of EU proposals to tackle the ongoing debt crisis across the eurozone. He stressed the need for countries to adhere to EU agreements on economic policy, saying, “We cannot afford anymore to tolerate a breach of jointly agreed rules. We have seen, only too concretely, that it happens at the cost of other Member States.”

The proposals suggest greater EU commission involvement in economic policy at a national level; the commission will be able to give an opinion on draft national budgets’ compliance with EU agreements and in troubled economies Rehn said the second proposal “foresees a graduated intensification of surveillance and of monitoring of program conditionality.”

Already under pressure from financial institutions on one side and populations groaning under austerity measures on the other, it remains to be seen whether governments across the EU can implement the Growth and Governance package and accept the proposals.

Liam Lever, liam@romania-insider.com