The question whether to allow European Financial Stability Facility, the EU’s bailout fund to buy troubled coutries’ sovereign bonds has been on the table for quite a while, but no decision has been taken yet, since Germany, the biggest contributor to the EFSF is strongly against this idea. Yet Benoît Cœuré, the ECB executive board member said EFSF should be allowed to buy Eurozone’s troubled members’ bonds. He also stated that a cut in interest rates was likely to be discussed at next month’s ECB rate-setting meeting on 5 July.

Similarly, Italy’s prime minister, Mario Monti proposed this alternative on the G20 Summit in Los Cabos this week. His counterparts, France’s president Francois Hollande and Mariano Rajoy, Spanish prime minister backed up Monti’s proposal, hoping it could help stabilize borrowing costs for troubled economies. However, Mrs. Merkel is not the only one who is not eager about the idea. The Dutch and Finnish prime ministers also seem very skeptical. Hence, the next week’s EU summit is expected to propose European banking union and further integration of fiscal policies.

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