The EU's executive body is drafting a proposal to bundle some euro-zone debt into a new financing instrument. German government advisors have warned the proposal amounts to implementing eurobonds through the backdoor.

EU Commission President Jean-Claude Juncker. Picture source: DPA

The European Commission is drafting a proposal to bundle some debt of the euro-zone states into a new financing instrument called “European Safe Bonds,” according to information obtained by Handelsblatt.

The goal of the bonds would be to reduce the risk of member states going bankrupt or contagion spreading through banks. The commission aims to publish a white paper on the subject in March.

But opposition is already building in Germany. The finance ministry’s advisory council has warned Finance Minister Wolfgang Schäuble in a letter that the proposal amounts to implementing “eurobonds through the backdoor.”

The German government has already signaled to Brussels that it opposes the proposal, according to EU diplomats.

But the European Commission apparently has the support of the European Central Bank, which has organized a working group that will publish a report two days before the commission’s white paper.

According to Handelsblatt information, ECB experts support the idea of safe bonds, much to the frustration of some EU member states, who believe the central bank has no business helping the commission create new instruments for state financing.

Read the full story in Friday's Handelsblatt Global. http://hbge.net/9vmyo