A political showdown is expected in Europe on Wednesday over the need to use Eurobonds to support Euro Zone following the expected destabilizing exit of Greece from the currency union.

During the forthcoming informal meeting on Wednesday, the EU leaders are expected to agree on the best growth and financial pacts in order to strengthen recovery. But there seems to be a major rift within the union over Eurobonds which are the main proposal.

eurobonds, euro bonds, political showdown, French president Francois Hollande, Francois Hollande, Greek government, Angela Merkel

Germany has so far declined to support a jointly lent debt saying that it can only do so if there is greater financial integration. France and the United Kingdom are demanding for the use of Eurobonds in order to raise funds to initiate growth.

Wolfgang Schaeuble, German finance minister met his French counterpart, Pierre Moscovici, in Berlin on Monday following an unconvincing G8 meeting over the weekend. They met to discuss a few issues concerning the Euro and also to try to find a common ground. Leaders at the G8 meeting agreed to help Greece remain in the currency union using different measures.

German and France have been inconsistent over the Eurobonds since Francois Hollande came to power a few weeks ago. An official from German’s finance ministry on Monday insisted that Berlin was against the use of Eurobonds.

The official also reiterated that German is outright against Eurobonds as long as there is no integration of financial policy in Europe. This discrepancy comes from fears that Eurobonds will allow weak governments to have access to cheap cash, which will in turn take the heat off governments to put into practice essential reforms.

Using a rather harsh tone, a former member of Bundesbank board of members, Thilo Sarrazin has also expressed his concerns about Eurobonds saying that they were some form of self-punishment for the atrocities of World War II.

Mr. Sarrazin has also authored a book titled: Europe Doesn’t Need the Euro. In this book, Sarrazin notes that German’s attempt to bailout the Euro was triggered by the country’s reaction that the Holocaust and the Second World War will only be agreed for after all other interests, including funds will be in Europe’s hands.

Although most world leaders are eagerly waiting for policies that may boost market confidence that Euro Zone will not collapse, Germany has continued to isolate itself.

One EU bureaucrat has noted that the debate about Eurobonds is allover and Hollande will be unanimously support by other leaders in case he brings it up. The official also added that even though it might not happen at once, there are plans to find a better way of dealing with Eurobonds.

Although attention is expected to shift to the Eurobonds, debate about growth pact will also entail Hollande’s request for more funds for the EIB so that it can invest in more infrastructures in the weaker countries that are within Euro zone to boost growth.

Germany seems to acknowledge growth pact as long as the financial pact on debt reduction is not ignored. Jörg Asmussen, Germany’s envoy on the administrative board of the ECB noted that financial pact requires to be approved immediately.

Hollande insists that there should be growth measures before he can sign the financial pact.