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German Commissioner calls for eurobonds

The Local · 3 Dec 2011, 09:59

Published: 03 Dec 2011 09:59 GMT+01:00

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“One cannot categorically rule out eurobonds. They may become necessary,” Oettinger told Die Welt newspaper in remarks published on Saturday. The energy commissioner, who is a member of Chancellor Angela Merkel’s conservative Christian Democrats (CDU), told the paper that eurobonds could “create a key building block next to the consolidation measures and the changes to the Lisbon Treaty.”

By pooling European debt, eurobonds would keep a lid on borrowing costs for member states but that would mean pushing up German borrowing costs.

Oettinger expressed the hope that Merkel would yet change her position. He said no one laid all their cards on the table at the beginning of negotiations.

Germany is laying out its position ahead of a crucial summit next Friday. EU leaders will gather to try to hash out a solution to the eurozone’s spiralling debt crisis, which has seen some member states facing unsustainable borrowing costs as investors flee eurozone sovereign bonds.

Oettinger said he was in favour of limited changes to the treaties so that those who broke rules on deficits would automatically face sanctions. “A facility must be created to call on the European Court of Justice,” he said.

However, he warned against changing the role of the European Central Bank (ECB) to emulate that of the American Federal Reserve. The ECB's current role is limited to ensuring price stability and fighting inflation. Germany has long resisted calls to use the ECB as a lender of last resort. It fears that if the bank were to create new money to purchase government bonds from at-risk countries it could lead to rampant inflation.

Meanwhile, Finance Minister Wolfgang Schäuble reiterated his firm rejection of eurobonds. Speaking to the Passauer Neue Presse, he insisted that pooling bonds was something that the European treaties excluded. “There can be no eurobonds. The German economy would be overburdened if we had to guarantee the debts of other states.”

Instead Schäuble wants to see the rules of the Stability and Growth Pact enforced. In particular debts must not be allowed to rise above 60 percent of gross domestic product, he said.

In a key speech to the German parliament on Friday on the euro crisis, Merkel spoke out against eurobonds, saying: “Whoever has not understood that they cannot be the solution to the crisis has not understood the nature of the crisis.”

Story continues below…

She also ruled out using the ECB as lender of last resort. Instead she said Germany would push for a “fiscal union” which could impose tough budgetary disciple on the eurozone states.

DAPD/AFP/The Local/smd

The Local (news@thelocal.de)

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Your comments about this article

10:33 December 3, 2011 by luckylongshot
Congratulations to Angela Merket and Wolfgang Schäuble for opposing Euro bonds. They are 100% correct in pointing out that those proposing Eurobonds do not understand the nature of the Euro crisis. This is that levels of debt throughout the Eurozone have reached the levels where countries can no longer afford to pay the interest. A solution based on shifting the costs to stronger economies merely delays the crisis. What is needed now is systemic change:

The key issue that needs to be addressed is why a group of private bankers should be allowed to keep their stranglehold on the issuing of currency. If this right was reuturned to the public then Governments could issue currency again and so so without interest attached to it. This would enable all public debt to be made interest free and would solve this Euro crisis over night. It would also spur an economic mini boom as billions could be diverted from paying the private bankers into creating jobs. This is where the debate needs to be focused, not on extending the public wealth reduction system that is fractional reserve banking.
11:29 December 3, 2011 by storymann
I agree with your assessment luckylongshot I think Herr Oettinger has given up his nationalism and believes that allowing the indebted members to borrow at lower rates will give them time to put in austerity measures and work their way out of high debt to GDP. Why would they inflame the electorate when they can borrow at good rates to pay their debts? There by punishing Nations like Germany with higher interest rates , that have worked hard to keep their debt low and no longer are rewarded with lower interest,. The obvious conclusion would be that it is better to be an idle fool than a busy one.
16:19 December 3, 2011 by r2d2c3po
Eorobonds are really German bonds because Germany is the only country large enough and fiscally responsible enough to support them. Well said luckylongshot.

The idea of a special fund for sovereign debt is a bit of a joke considering how much the other countries owe.
19:14 December 3, 2011 by elboertjie
Going the route of Eurobonds is a sure way of destroying any viable economy that is left within the more healthier nations. Governments should own their money, interest free, and stop fractional reserve banking.

Either way, it is a good time as ever for people to get ready for this big change, because no matter what comes next, currency inflation would make all of us poorer by us needing more diluted currency to purchase goods. This reminds a little of the situation on the ground for the people during the hyper inflation Reichmark period.
20:26 December 3, 2011 by coffejohn
If not Eurobonds then what? Are you seriously going to bet your economy on the promise of club med countries to do what they have failed to do up to now.

Oh yes, sorry I nearly forgot, you already have.
23:28 December 3, 2011 by Logic Guy
Well, I'm sure in the back of most EU leaders mind, they know that the very best thing for the entire EU, is for the weakest nations to exit and establish a new currency of their own. It's just that the idea is so painfully frightening.

The EU would survive, if some nations were to leave. However, eurobonds are the one thing that could destroy the continent. We must all be logical and agree, that if Germany, France and other stable nations go down, then not only would it mean the end of Europe, such a disaster would drive America off the edge too.

And with most of humanity and the world, coming off the hinges, then you know what will probably come next....World War 3!

Sometimes less is more. Greed is not good. High self-esteem should be our king. Human life really should be simple and easy. We just need to inspire the most intelligent and rational people, to take on leading roles.

Simple stuff!
10:02 December 4, 2011 by _JD
When the Schloss Palace is Berlin is completed next year, with the eagles carved from the same stone that made up the original, if the debate in Germany has not returned to it's more enlightened attitude, the whole of Europe will rally against the Germans, and for good reason. Kohl and Schmidt are not fools, they understand that narrow economic thinking is short sighted and despite it's claims, at times not even practical. That is why they understand that the 100 Billion it could cost Germany to support Euro Bonds is cheap stuff compared with the alternatives.

Indulging in mocking language - for instance referring to one's struggling neighbors as the 'club med' countries - is an attack on European solidarity.. To speak casually of 'two euros' or 'kicking them out' - which means to blow up a 70 year project which has brought peace and prosperity - is indulging in a dream-world. There is no legal mechanism for either of these two options and the path towards them would be so destructive that no one would be left standing.

As an Italian commentator put it recently, what is at stake here is preserving a model of civilisation that is quite different than that of the US or China - social justice and political freedom, regulation of industry and chemicals, child-care - all things that are absent in the dog-eat-dog systems elsewhere. These things are too important to discuss in juvenile tones.

If the German's had followed Kohl's advice and re-committed to European solidarity a year ago the price would be much cheaper!
10:40 December 4, 2011 by Irlandia
Chancellor Merkel seems to have no regard for the views of the people of the European Unions 27 sovereign states. Constantly we hear about the need for closer union and earlier this week, Mrs. Merkel vowed that there would be ever closer fiscal union. But the people have not been consulted. In my country, the Republic of Ireland, the Nice and Lisbon treaties were initially rejected by the people and only passed after subsequent referendums. On every occasion the people were assured that Irish sovereignty was safe, that we would continue to be an independent state. We did not sign up for a United States of Europe and I have no doubt if that question was put directly to the people of most EU member states they would say No to it. Ireland is one of the few EU countries that holds referendums on such issues and it is clear that this democratic process is resented by people like Barroso, Merkel and Sarkozy, which is why they avoid them in their own countries. The 500 million citizens of the 27 EU member states are not being asked their opinion. The democratic deficit is enormous. Now Mrs. Merkel and her French counterpart Mr. Sarkozy act as if they were elected leaders of the European Union. The 25 other countries are not consulted and the people of the EU are mere spectators in this process. We need to settle such issues democratically, without subterfuge or threats of expulsion, economic isolation and bankruptcy. Let the people decide!
13:02 December 4, 2011 by storymann
Why should Germany be chastised because they are not willing to support states that have a more relaxed work effort , like Italy, Greece ,Ireland and Portugal with their money?

If no Euro bonds then perhaps a break up ,where states that have maintained good fiscal discipline form a different Union and those that have not can deal with their own budget shortfalls with a more serious approach to austerity.

Mrs Merkels statements about a closer fiscal union are not about creating a debtor zone but about rewriting the constitution giving it more authority to enforce better fiscal discipline in those states that cannot .
19:43 December 4, 2011 by derExDeutsche

Why are you still hawking the same old boring EU snake oil? you said, 'a 70 year project which has brought peace and prosperity' have you been on Planet Earth these last several years? The premise that the EU would bring 'Stability' has failed in grand fashion. Your dream state of 'Social Justice' and 'Free Stuff' has failed all across Europe. and the Crisis is continuing its downward spiral of even more debt, as parts of the EU are in flames and governed undemocratically. A continent's voters corrupted by promises of 'Free Stuff' and State ism is the cause. You types who were asking ' what is freedom if we don't even have free healthcare?' may soon have neither. Listening to the voices all around Europe tells a story. And People of Europe's version certainly sounds nothing like yours. No, you, the elitists, the Eurocrats, the unelected Governments put in place to govern; You are all singing the 'New World Order' Anthem. Well guess what, its corrupt and it stinks, and the people know it. But you'll have the last of the credit left and some Libyan Oil to help pay for a few more months of it.

Now you can like an 'adult' ignore all these juvenile posts, put your fingers in your ear and sing LALALALALALALALA. The world is moving on without you, the collapse of the Euro as we know is definite.
09:18 December 6, 2011 by ChrisRea
@ derExDeutsche

You seem to be very sure of yourself, even if you bring in only subjective information. Can you also give a precise forecast of when will Euro collapse? In five days? Five months? Five years? Five decades? Five centuries? I am also pretty sure it has to collapse sometimes, as all earthly things do.
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