• 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
Germany lags in permits for non-EU migrants
Photo: DPA

Germany lags in permits for non-EU migrants

Germany gave out fewer residency permits last year per head to non-EU citizens than any other major European economy. READ  

Hamburg volunteers test Ebola vaccine
Hamburg's UKE has helped lead the fight against Ebola. Photo: DPA

Hamburg volunteers test Ebola vaccine

Volunteers have rolled up their sleeves for the first phase of the human trial for an Ebola vaccine at the Hamburg-Eppendorf University Clinic (UKE), it was announced on Wednesday evening. READ  

US adds voice to chorus telling Germany to spend
Jacob Lew and Sigmar Gabriel. Photo: DPA

US adds voice to chorus telling Germany to spend

US Treasury Secretary Jacob Lew, in a meeting on Wednesday with German Economy Minister Sigmar Gabriel, called on Germany to boost public spending to stimulate stuttering eurozone growth, the Treasury said. READ  

Man leaps with son, 5, from third-floor window
Schönhauser Allee in Berlin. Photo: DPA

Man leaps with son, 5, from third-floor window

A father and his young son are in serious condition after police and firefighters were called to their home in northeast Berlin early on Wednesday morning. READ  

North braces for storms and floods
Cars waiting to be loaded onto the ferry at Bremerhaven, Lower Saxony, were caught in flooding on Wendnesday. Photo: DPA

North braces for storms and floods

UPDATE: The remnants of hurricane Gonzalo have drifted across the Atlantic and are now threatening North German cities with flooding, forecasters warned on Wednesday. The news followed a night of accidents caused by heavy winds in southern Germany. READ  

Kerry's challenge to Russia at Berlin Wall
US Secretary of State John Kerry at the Berlin Wall. Photo: DPA

Kerry's challenge to Russia at Berlin Wall

US Secretary of State John Kerry visited remnants of the Berlin Wall on Wednesday and warned that East-West tensions again threaten freedom in Europe, 25 years after its collapse. READ  

Satirist lives the dream on EU gravy train
Sonneborn in the EU Parliament. Photo: DPA

Satirist lives the dream on EU gravy train

Martin Sonneborn can’t believe his luck. The German comedian, leader of the political party “Die Partei”, managed to get elected to the European Parliament in May, and has found himself overwhelmed with fresh material. READ  

The Local List
Which high school cliche is your city?
Photo: DPA/Shutterstock

Which high school cliche is your city?

This week's Local List takes a leap of imagination and finds German cities fit perfectly into high school cliche categories. Who's the class clown? Who's the nerd? READ  

'German' hand grenades paraded by Isis in Syria
A screen grab from a jihadist video showing the grenades. Photo: DPA

'German' hand grenades paraded by Isis in Syria

The German military was on Wednesday investigating reports that Bundeswehr hand grenades have fallen into the hands of the Islamic State (Isis) terrorist group after a video appearing to show captured weapons surfaced on the Internet. READ  

Indian schools drop German teaching
Indian pupils enrolled in German classes prepare for Foreign Minister Frank-Walter Steinmeier's visit to their school. Photo: DPA

Indian schools drop German teaching

Thousands of children in India will no longer be taught German after the country's education ministry allowed a contract to lapse. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: DPA/Shutterstock
Gallery
Which high school cliche is your German city?
Photo: DPA
Gallery
Storm hits southern Germany
Sponsored Article
An international school unlike any other : School on the Rhine
Photo: Fitzpatrick family
Society
'We still don't know what happened to Matthew'
Photo: Mariana Schroeder
Munich
Special Report: Hope and chaos at Munich's refugee shelters
Photo: DPA
Berlin
Robbers blow up Berlin bank
Photo: DPA
Culture
Can you top our history quiz leaderboard?
Photo: Facebook
Society
German motorcycle gang joins Isis fight
Photo: DPA
Politics
UKIP ‘seeks EU pact’ with German satirical party
Photo: DPA
Gallery
PHOTOS: World's biggest erotic fair opens in Berlin
Photo: DPA/Shutterstock
Gallery
11 things Germans are afraid of...
Photo: DPA
Gallery
The ten richest people in Germany
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
National
Share news tips with The Local Germany
Sponsored Article
Bilingual education from nursery to graduation at Phorms
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

3,510
jobs available
Toytown Germany
Germany's English-speaking crowd