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Merkel emphasizes 'no' to eurobonds, for now

The Local · 22 Aug 2011, 09:54

Published: 22 Aug 2011 09:54 GMT+02:00

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In an interview with ZDF public television, Merkel said that, for the time being, eurobonds would be "exactly the wrong road to take" because they would lead to a "debt union instead of more stability."

"The solution to the current crisis will not be with eurobonds," she said. However she added that she did not know "whether we in the distant future will need to further adapt."

French President Nicolas Sarkozy and Merkel said at a summit in Paris Tuesday that eurobonds were not the answer "today" to the eurozone debt crisis. But they appeared to leave wiggle room for a change in policy if circumstances in the eurozone worsen, sparking rumblings of concern in Berlin.

Horst Seehofer, head of the Christian Social Union, the Bavarian sister party to Merkel's conservative Christian Democrats, told business magazine Wirtschaftswoche that eurobonds would be damaging to the European economy as well as unfair.

"The effect would be debt, inflation and the destruction of economic opportunities," he was quoted as saying in an issue to be published Monday.

Seehofer said his CSU would draw a line at attempts to share out Europe's debt burden, which he said would only stoke an "inflationary trend."

"We again turned a blind eye to the ECB buying bonds but that should not be taken as carte blanche," he said, referring to crisis-fighting measures taken by the European Central Bank.

"We will not go along with the next step - pooling debt. You cannot surmount excessive debt by spreading the burden to all."

And Vice Chancellor Philipp Rösler, the head of pro-business coalition partner the Free Democrats, had earlier ruled out eurobonds as long as his party governs Germany with the conservatives.

Supporters, including Germany's centre-left opposition, say eurobonds are a viable solution to the eurozone's debt crisis.

The strongest states, led by Germany, would underwrite weaker countries which would then find it easier to raise credit on the markets.

Opponents in Germany say it would raise the country's own borrowing costs´and remove an incentive for indebted nations to put their own fiscal houses in order.

Meanwhile Dutch Finance Minister Jan Kees de Jager urged Berlin to maintain a hard line against eurobonds, saying they would have the "perverse" effect of encouraging more debt.

Story continues below…

"I expect the German government to maintain its policy," he told the latest edition of weekly news magazine Der Spiegel.

"In the short term, eurobonds might calm the markets. But if you don't change the underlying conditions, then you will have the next crisis in five years, which might even be much worse than the current one because then even healthy countries such as Germany or the Netherlands will be much more indebted."

German Finance Minister Wolfgang Schäuble is to meet his French counterpart Francois Baroin on the eurozone crisis Tuesday while Merkel is to huddle for a special meeting with her CDU parliamentary group that evening.


The Local (news@thelocal.de)

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Your comments about this article

10:41 August 22, 2011 by storymann
I would not have expected Chancellor Merkel to do otherwise.

It is unfair to countries who have avoided debt crisis through fiscal responsibility. Germany will see their interest rate costs rise, closer to the Eurozone average. This is why it is politically unpopular in Germany.

If countries can benefit from overall Eurozone average, there may be less incentive to reduce wasteful spending and borrowing. Because debt will be secure, it may encourage countries to borrow more than prudent because they don¦#39;t have the same incentive to reduce borrowing. If there is a lack of fiscal discipline, overall Eurozone debt could continue to grow possibly making even Eurobonds lose credit worthiness over time and find themselves in a similar situation as the USA.
11:45 August 22, 2011 by johnny108
Thank God she has the courage to stand up to critics in other countries, who think Germany should pay for their mistakes!!!
20:35 August 22, 2011 by finanzdoktor
I have read varying opinions on this one, and for once, I have to agree with Chancellor Merkel. This fiscal mess was caused by myopic and self-interested governments in other countries, who lied on their financial and economic statistics, and now want Germany and others to bail them out. Until the entire EU gets its act together, it makes no sense to issue or even attempt to issue collective Euro-bonds.
05:42 August 23, 2011 by Unbias
To be fair I am an american to get it out there first. I don't know about a euro bond, but Germany and the Chancellar should do more to ease market sentiment like increase the reserves which she and the french president said was sufficient, this would at least show that Germany and France are willing to help. We talk the talk and,although as of late are not as powerful as we once were, have walked the walk. Argentina and chile needed help from the IMF years ago it was given US still accounts for 22% of monitary contributions and much greater then. Furthermore in 2008 when the US began to fall first it was Europe who scoren us for bad practice, yet come to find out when the report was finally published, the US not only lent money to Us banks but a very large % went to european banks. Conclusion, Amer
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