Euro Falls as Eurobond Debate Begins

23
May

Euro is dropping today as eurozone leaders meet to discuss growth options for the 17-nation currency zone. Eurozone growth has been sluggish, verging on recession, and that is impacting the ability of member states to handle their sovereign debt. One of the options being floated as part of a package is a eurobond. However, Germany is opposed to such a measure.

Euro is heading lower today, mostly due to uncertainty. There is uncertainty surrounding the Fitch downgrade of Japan. But mostly there is uncertainty in the eurozone. While there are widely published numbers that seem to indicate that most Greeks want to remain in the eurozone, the actions in the election seem to suggest otherwise. The leaders Greeks voted for are largely against austerity measures, and Greek citizens themselves have protested austerity for months. Without adhering to the austerity measures, there is little hope that Greece can remain in the eurozone.

Another issue being debated by European leaders right now is the idea of eurobonds. Eurozone bonds would be issued in an attempt to help increase funding options for various eurozone countries. These bonds would be issued jointly, and secured jointly. While the new French president, Francois Hollande, backs the idea of eurobonds, Germany is very much against them. This is just another wrench in the works of eurozone debate, and another reason risk aversion is on the rise.

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