The Financial Times reports that the Spanish PM is calling for a Eurozone fiscal authority and for individual nations to cede some authority over their budgets. Encouragingly, Germany's leader is signalling that this is a condition precedent for Eurobonds:
"Spain called on Saturday for a new fiscal eurozone authority which would harmonise national budgets and manage the block’s debts. Mariano Rajoy, prime minister, said the authority was the answer to the European debt crisis and would go a long way in alleviating Spain’s woes as it would send a clear signal to investors that the single currency is an irreversible project...Germany has said further integration in Europe was required, including additional controls on national public finances, and was ready to consider revising the treaties if needed. Angela Merkel, German chancellor, said there should be no taboos when discussing these questions. A day after Berlin supported giving Spain an extra year to cut its deficit down to the 3 percent of GDP threshold, Ms Merkel said it should be possible for countries that violate fiscal rules to be sued in the European Court of Justice...“You can’t ask for euro bonds, but then not be prepared to take the next step towards closer integration,” she said. “We won’t be able to create a successful currency together this way.”
With the debt crisis now centred on Spain’s teetering banking sector, talks are also under way on creating a banking union in the euro zone based on a centralised supervision, a European deposit scheme and a central fund that would cope with failed lenders. Germany’s finance ministry said on Friday it was willing to consider this option in a mid-term perspective."
