Thursday, December 09, 2010 10:41 AM

France Joins Germany to Nix Junker's Junk Bond Proposal to Save the Euro

Jean-Claude Juncker, President of the Euro Group and Prime Minister of Luxembourg (not to be confused with Jean-Claude Trichet, President of the ECB) hatched a plan to combine the bonds of all the Eurozone countries into one entity, saying E-bonds would end the crisis http://www.ft.com/cms/s/0/540d41c2-009f ... z17JJTBvsQ

Europe must formulate a strong and systemic response to the crisis, to send a clear message to global markets and European citizens of our political commitment to economic and monetary union, and the irreversibility of the euro.

This can be achieved by launching E-bonds, or European sovereign bonds, issued by a European Debt Agency (EDA) as successor to the current European Financial Stability Facility. Time is of the essence. The European Council could move as early as this month to create such an agency, with a mandate gradually to reach an amount of outstanding paper equivalent to 40 per cent of the gross domestic product of the European Union and of each member state.

Subprime Bundling is No Solution

Junker's plan is much like the idea of taking subprime loans bundling them together with AA and A loans, putting the mess into one package and stamping the whole thing AAA on the misguided notion (lie) that bundling would make everything safe.

With Junker's plan, higher rated countries like Germany and France would see their borrowing costs rise, while Ireland, Portugal, and Spain would see their borrowing costs dramatically lower.

Meanwhile as with subprime housing loans, the underlying rot would still be eating away at the core.

Germany Rejects Junker's Idea

Almost immediately Germany Snubs Pleas to Boost Aid, Sell Joint Bonds http://noir.bloomberg.com/apps/news?pid ... _uUhJcoU.k

Germany rejected calls to increase the European Union’s 750 billion-euro ($1 trillion) aid fund or introduce joint bond sales, signaling its refusal to bear extra costs to stamp out the debt crisis.

With European finance ministers gathered in Brussels today for their monthly meeting, German Chancellor Angela Merkel rebuffed pleas from Belgium and central bankers to boost the emergency fund to save countries such as Portugal and Spain from falling prey to speculation.

“Right now I see no need to expand the fund,â€