• Germany edition
 
Bond market jitters misplaced, Germany says
Photo: DPA

Bond market jitters misplaced, Germany says

Published: 12 Nov 2010 08:09 GMT+01:00
Updated: 12 Nov 2010 08:09 GMT+01:00

"Any new (bailout) mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements," finance ministers from Britain, France, Germany, Italy and Spain said in the declaration, issued at a G20 summit in Seoul.

Germany is backing a plan to force private investors to bear a share of bailout costs for countries facing fiscal ruin.

But German Finance Minister Wolfgang Schäuble stressed Friday this would only take effect in three years, and was not to blame for the rise in interest yields on Irish government bonds to record levels.

He said investors were guilty of a "total misunderstanding."

"It has to do with decisions from the European Council (EU leaders), and it's a total misassessment of the issues at hand.... It has absolutely nothing to do with any current discussion, and you can't get them mixed up," he added.

Ireland's cost of borrowing hit record highs on Thursday. Ten-year government bond yields jumped to 8.929 percent, the highest level since the euro was created in 1999, placing Europe's bond markets under serious strain.

The leap fuelled fears that the eurozone debt and deficit crisis could be entering a dangerous second phase just six months after a massive bailout of Greece, to which Germany was the biggest contributor.

Portuguese bond yields also hit historic peaks on Thursday.

German Chancellor Angela Merkel said Thursday that European taxpayers should not pay the whole cost of rescuing debt-laden countries.

“Let me put it simply - there may be a contradiction between the interests of the financial world and those of the political world," she said at a G20 business summit in Seoul.

"We cannot explain to our voters and citizens why taxpayers must finance certain risks, and not those who made a great deal of money taking those risks."

Under Merkel's proposals, future rescue packages would only be launched if government bondholders agree to bear some losses.

EU leaders agreed last month to design a permanent plan of aid and penalties for eurozone countries facing fiscal ruin, to take over after the lifespan of a current crisis response fund ends in 2013.

But the European ministers stressed Friday that "the EFSF (European Financial Stability Fund) is already established and its activation does not require private-sector involvement," adding that the new system from 2013 "could include a range of possibilities."

"Whatever the debate within the euro area about the future permanent crisis resolution mechanism, and the potential for private sector involvement in that mechanism, we are clear that this does not apply to any outstanding debt and any programme under current instruments," they said.

European Commission president Jose Manuel Barroso said Thursday that the European Union was prepared to stand by Ireland.

"What is important to know is that we have all the necessary instruments in place now to support Ireland if necessary," said Barroso.

Irish bond yields - the rate of return paid to investors holding the government debt instruments - have soared in the face of mounting investor unease at the stretched public finances. Later this month, Finance Minister Brian Lenihan will unveil a four-year programme of austerity measures that will involve a €15-billion correction to rein in the huge public deficit, ahead of the annual budget in December.

AFP/ka

The Local (news@thelocal.de)

Your comments about this article

Today's headlines
Bundesbank warns of ECB 'change of course'
Bundesbank chief Jens Weidmann: Photo: DPA

Bundesbank warns of ECB 'change of course'

The head of Germany's powerful Bundesbank sharply criticised what he called a radical new approach by the European Central Bank of easy money, in an interview published Sunday. READ  

MH17 Crash
Families of German MH17 victims to sue
Australian and Dutch investigators examine a piece of debris of Malaysia Airlines Flight MH17 plane. Photo: EPA/DPA/ Igor Kovalenko

Families of German MH17 victims to sue

Relatives of German victims of downed Malaysia Airlines flight MH17 plan to sue Ukraine and its president for criminal negligence for not closing the country's airspace, a lawyer said Sunday. READ  

Sport
Wonder goal puts new boys Paderborn on top
Paderborn players celebrate after defeating Hanover 2-0 to go top of the Bundesliga. Photo: DPA

Wonder goal puts new boys Paderborn on top

Promoted Paderborn went top of the Bundesliga helped by an extraordinary 80-metre goal at Hanover on Saturday as champions Bayern Munich were held to a goalless draw by struggling Hamburg. READ  

Oktoberfest 2014
Oktoberfest opens to toast millions
Celebrities Carolin Reiber and Marianne Sägebrecht raise their glasses at Oktoberfest 2014. Photo: DPA

Oktoberfest opens to toast millions

Germany's world-famous Oktoberfest kicked off Saturday with the traditional tapping of the first barrel of beer, as millions of revellers are set to soak up the frothy atmosphere in the 16-day annual extravaganza. READ  

Germany plan air lifts to help fight Ebola
A Liberian man holds his daughter as they wait for treatment for suspected Ebola symptoms in Monrovia. Photo: DPA

Germany plan air lifts to help fight Ebola

Germany and France will send military transport planes to West Africa to help efforts to contain the Ebola epidemic, Chancellor Angela Merkel and military officials said on Friday. READ  

Germany beefs up asylum rules for Balkans

Germany beefs up asylum rules for Balkans

Germany made it harder Friday for people from Bosnia-Herzegovina, Macedonia and Serbia to apply for asylum after lawmakers classified the three Balkan countries as safe, with respect for basic rights. READ  

German Muslims rally against extremism
Muslims pray in Kreuzberg, Berlin, on Friday outside a mosque which was damaged in an arson attack. Photo: DPA

German Muslims rally against extremism

Muslims across Germany held a day of prayers and rallies on Friday to condemn both Islamic extremism and a backlash against their faith that has seen arson attacks on mosques. READ  

German military flight to Iraq starts with a hiccup
The trainers on the air strip in Hohn, Schleswig-Holstein. Photo: Bundeswehr.

German military flight to Iraq starts with a hiccup

Military trainers flew to northern Iraq from Germany on Friday, ahead of a huge delivery of weapons from the German military, but things didn’t initially go as planned. READ  

Munich gets four Euro 2020 matches
Photo: DPA

Munich gets four Euro 2020 matches

UPDATE: Munich will play host to four Euro 2020 games, European football’s governing body Uefa announced in Geneva on Friday, but London was the real winner. READ  

Driver, 18, ploughs into school pupils
The scene by the bus stop outside the school in Diepholz. Photo: DPA

Driver, 18, ploughs into school pupils

An 18-year-old drove into a group of students outside a school in western Germany on Friday morning, injuring several. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: DPA
Culture
Your guide to Munich Oktoberfest's tents
Photo: DPA
Hamburg
Drunk teachers ruin school trip to Hamburg
Marks & Spencer
Sponsored Article
Fashion Ladies of the Local: Win a New Autumn Look
Photo: DPA
Gallery
Oktoberfest 2014: The best and worst in dirndl fashion
Photo: Shutterstock
Gallery
Ten German words you'll never want to hear again
Photo: DPA
Education
German universities tumble in global rankings
Photo: Shutterstock
Business & Money
The three types of firms hiring foreigners
Photo: DPA
Berlin
Frisky couple shock Berlin commuters
Sponsored Article
Bilingual education from nursery to graduation at Phorms
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

3,365
jobs available
Toytown Germany
Germany's English-speaking crowd