Germany stiffens opposition to eurobonds before summit

(BERLIN) - Germany hardened its opposition to the introduction of eurobonds on Tuesday, on the eve of an EU summit where France and other countries are likely to pressure Berlin to change its stance.

"This is not a new discussion ... we think it is the wrong way," the source told reporters ahead of an informal gathering of EU leaders in Brussels.

He added: "This is a fundamental position and it also won't change by June," when EU leaders are slated to hold their following summit on the eurozone crisis.

The official, who requested anonymity, said: "In this respect, I do not see eurobonds as a topic for the dinner" involving EU heads of state and government on Wednesday night.

However, a second source acknowledged that if some leaders wanted to discuss the issue, then Germany "would give its opinion."

"There is no legal basis for eurobonds. They are even explicitly forbidden" in the EU treaties, the source said.

New French President Francois Hollande is pushing eurobonds -- the pooling of the debt of eurozone countries -- as a solution to the crisis.

The European Commission is also strongly in favour and has tabled proposals for so-called stability bonds they believe would drive down the borrowing costs for debt-stricken countries such as Italy and Spain.

But Chancellor Angela Merkel fears that this would both push up Germany's ultra-low borrowing costs and reduce the incentive for countries to balance their books.

The source denied there was any conflict with Paris on this issue. "I don't now believe there is any conflict with France," he stressed.

France and Germany have been instrumental in shaping the strategy to tackle the eurozone debt crisis and this was unlikely to change, he added.

The official drew a sharp distinction between eurobonds and project bonds -- drawing on EU funds for specific investment activities in struggling member states.

"They have nothing, absolutely nothing, to do with each other. Just because they are both called 'bonds' doesn't mean they have anything to do with each other," he added.

He said that leaders would discuss how to better use EU funds to help debt-wracked countries but that this was a matter for the European Commission and the individual member states to work out bilaterally.

The summit would also deal with filling up the coffers of the European Investment Bank (EIB), which funds infrastructure projects in Europe.

European Union president Herman Van Rompuy has called for a "no taboos" debate and the newly elected French government has said that "everything should be on the table" amid rising opposition to the German-led anti-crisis strategy.

However, the German official played down the importance of the talks, saying: "Let me tell you what this summit is not: it is not a decision-making summit. It is not a special summit on Greece.

"It is just that a lot of stuff has happened since the EU leaders last met in March and the summit is to prepare the summit which will really be a decisive meeting in June," the official said.

He said there would be no special statement on Greece, although leaders were expected to discuss "the current situation" in the eurozone.

"As we said at the G8, we want Greece to stay in the euro, but this is preconditioned on the fact that Greece sticks to its commitments. This position will also not change by Wednesday," the official said.

He also ruled out a decision on a new president of the Eurogroup of finance ministers at the summit.

The current chairman, Luxembourg Prime Minister Jean-Claude Juncker, steps down in July and the German Finance Minister Wolfgang Schaeuble has been cited as a possible replacement.

But the appointment is also bound up in several other high-profile nominations, including a new member of the European Central Bank's Executive Board and a new head of the EU's bailout fund, the EFSF.