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Italy calls for European bond

Posted on: Monday, 2 February 2009, 08:16 CST

Italian Finance Minister Giulio Tremonti in Davos, Switzerland, said he was in favor of establishing a European Union bond.

With Italy's debt-to-gross domestic product ratio over 100 percent, lenders are demanding higher returns on Italian bonds, the European Observer reported Monday.

Speaking at the World Economic Forum last week, Tremonti said, I am speaking of a political issue not an economic issue … now we need a union bond.

The concept is not universally appealing to European Union member states, however. German Bundesbank president Axel Weber pointed to personal responsibility for financial policy and the commitment to solid public finances of every member state.

The call for a unified bond came as the European Central Bank was drawing up guidelines for establishing repository banks that would deal with toxic security assets.

Germany is considering the option of having banks create their own repositories or so-called bad banks that would hold onto securities until they could be sold.

It is hoped that removing the toxic assets from the banks' ledgers would improve their bottom line and enable them to resume lending to businesses and consumers.

Source: United Press International

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