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Merkel: Hard work, not eurobonds, will fix euro

The Local · 25 May 2012, 08:22

Published: 25 May 2012 08:22 GMT+02:00

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"It makes no sense to want to fix everything with eurobonds or other similar 'solidarity' instruments" which would "only aggravate the crisis," Merkel told an electrical industry conference in Berlin.

The euro area's long-running sovereign debt crisis "will not be resolved with a miracle cure but will require a great deal of hard work" in the form of fiscal consolidation and structural reforms, she said.

Debt-wracked countries could make a start by "not spending more than they take in in revenues," Merkel argued.

The view was echoed by German Foreign Minister Guido Westerwelle who told a joint press conference with visiting British Deputy Prime Minister Nick Clegg that eurobonds created the "wrong impulse" for solving problems of debt and a lack of competitiveness.

"We think we cannot solve a debt crisis by making it easier to take up new debt," he said.

For his part, Clegg warned against getting "fixated by eurobonds as such" and called for "a new grand bargain, between North and South, between creditor and debtor countries, between exporting and consuming countries.

"My point is, you can't do that through austerity alone, there are many other ways. You can have more monetary activism from the European Central Bank, you can have transfers of money ... or you could mutualise debt in the long run," he told reporters.

France's new President Francois Hollande is spearheading a drive for eurobonds, in effect pooling the debt of eurozone countries, in order to raise fresh debt funding.

But Germany is firmly opposed to such a move, arguing it takes away the pressure for reform in spendthrift countries and also undermines market discipline.

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Berlin says using eurobonds now, before member states seal in stone a shared fiscal and economy policy, would only increase the bloc's total debt burden while increasing its own borrowing costs.

France and some other eurozone states say that eurobonds could fund desperately needed growth policies after years of austerity have pushed the economy into recession.


The Local (news@thelocal.de)

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Your comments about this article

10:04 May 25, 2012 by Sayer
Comment removed by The Local for breach of our terms.
11:56 May 25, 2012 by smart2012
Merkel, just hard work is not enough and I will give u an example to explain the reason: Greece has implemented very strong austerity measures in the last 2 years (very hard work), however at the moment they are paying 30% interest rate on their debt (Germany pays < 1%, France 2%, Italy 3%, Spain 4%), which means Greece is generating more debt rather than what it is saving. The only way to address this is having a european economy, which means Euro bond, which would enable to get to a more realistic interest rate. That is why solution is hard work AND eurobond. very simple. Similar issue in Germany is faced by North Rein Westphalia, where hard work only has proven not to work (that is why CDU lost drastically)
21:07 May 25, 2012 by McM
As I stated a couple of days ago.Solvency is still the only real issue for the Eurozone. Eurobonds do nothing to address this core issue besides shifting the deck chairs. Sadly the smart money has already drained out of the EU banking fat long ago . The rating agencies are merely thermometers that reflect previous hard data and are not at all drivers but only latent reflectors. I don't see a solution that will let the Eurozone play in the finance world's A league until it sorts out the group solvency issues and growth is based on productivity and not subsidies based on further hasty credit. Frau Merkal may just be right on this one .
16:11 May 26, 2012 by catjones
The nettle is a concept I cannot grasp. Straws, on the other hand, are a different story.
09:11 May 27, 2012 by Englishted
Hard Work and 10.9% unemployment in the Eurozone .

I would join in the mixed metaphor contest but I have not had breakfast and I never eat on a empty stomach.
23:17 May 27, 2012 by narfmaster
I agree with smart2012 about hard work not being enough for the 30% reason stated. However, I don't agree with Eurobonds for all of the reasons Merkel has stated. There must be some reason for countries to balance their budgets. In the short term, it seems the solution is to have someone else pay for Greece's debt as then the crisis and the 30% interest problem goes away. The Greek debt is small enough that Germany alone could pay the whole thing off. However, the best might be to pay it off in pieces with strings attached. Germany or the EU could say that they make the monthly payments so long as Greece implements a certain set of rules and up to some number of years. Such a 5 or 10 year agreement would assure the markets the debts would be paid for that long and a lower percentage interest rate could be acquired. At the same time, Greece would be forced to do things they don't want to do, like increasing the retirement age, increased austerity cuts, etc. The rules would have to be quite nasty in order to make other countries want to avoid getting in the same situation. Otherwise, others will not care if they can make their payments or not as someone will just bail them out.

Of course, Greece could just say no and things would be as bad as they are now. But at least the deal could always stay on the table and when the Greeks are sick of starving, they can change their minds.
10:38 May 30, 2012 by AlexR
Sure... hard work will solve everything. Then perhaps Merkel could explain the following discrepancy.

According to OECD, the Greeks are the hardest working in Europe. The average annual hours per worker in Greece is more than 50% higher than Germany. Also, the Germans take more holiday, sickness leave and maternity leave - on average four weeks more than the Greeks. Full data here:


If the hard work is the reason and solution for the crisis then according to the above, it had to be Germany, not Greece, the one who suffered from the Euro monetary union. Why they aren't?
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