Merkel shoots down eurobonds and bank aid

June 23, 2012 at 10:57 AM
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ROME, June 23 (UPI) -- German Chancellor Angela Merkel rejected two key proposals in Europe designed to ease the financial struggles spreading through the eurozone.

After a mini-European summit with French President Francois Hollande and Italian and Spanish prime ministers Mario Monti and Mariano Rajoy, Merkel rejected the concept of forming a eurobond meant to help debt-burdened countries to borrow at affordable costs, The Daily Telegraph reported Saturday.

Merkel, known as "La Signora No" in Italy, also rejected the concept of sending funds from two international bailout facilities directly to banks, which would allow those banks to buy government bonds while allowing the host country to avoid having the bailout add to its debt burden.

Currently, the bailout programs are set up to loan money to governments, not to banks.

"If I give money straight to Spanish banks, I can't control what they do. That is how the treaties are written," Merkel said.

"Each country wants to help but if I am going to call on taxpayers in Germany, I must have guarantees that all is under control. Responsibility and control go hand in hand," she said after a meeting in Rome with Hollande, Rajoy and Monti, each of whom agreed with the proposals.

International Monetary Fund chief Christine Lagarde has also backed the new bailout measures.

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