Merkel: No eurobonds ‘as long as I live’

Chancellor Angela Merkel swore there would be no eurobonds for, “as long as I live” ahead of what has been described as a last-gasp EU summit to save the currency on Thursday.

Merkel: No eurobonds 'as long as I live'
Photo: DPA

With pressure increasing for eurobonds to share the debt of EU member countries, Merkel laid down the law, turning her repeated “no” to the idea into a “never”.

She was speaking to a meeting of the parliamentary group of her business-friendly coalition partner the Free Democratic Party on Tuesday when she made the uncharacteristically strong statement.

And on Wednesday she addressed the full parliament and told MPs there were “no quick, no easy” solutions, nor a “magic formula”, and called for the problem to be tackled at its roots.

“Everything else is doomed to failure from the start. At best it is window dressing,” she told the Bundestag lower house of parliament in a speech lasting around 25 minutes punctuated by applause.

Under pressure from financial markets and international partners to come up with convincing responses to the more than two-year long eurozone crisis in Brussels, Merkel said she was under “no illusion”.

“There will be controversial discussions in Brussels. And yet again, all eyes, or at least several eyes, will be on Germany.”

“But I repeat that Germany’s strength is not unlimited. Germany’s power is not endless,” she warned.

The EU is pushing for a collective financing of members’ debt, a bank union and eventually a Treasury office to oversee the currency, the Die Welt newspaper said on Wednesday.

Commission President Jose Manuel Barroso stressed that the plan was not only about European economic integration but also to generate more confidence in the euro and get nations to commit to the European project.

Merkel is said to be looking increasingly isolated in her opposition to the idea.

The latest – fifth – European Union bailout candidate is Cyprus, where sources expect the nation will need as much as €10 billion, or more than twice the country’s annual output.

Europe’s politicians have engaged in a flurry of shuttle diplomacy to thrash out a solution, culminating in Merkel’s dinner with French President Francois Hollande on Wednesday.

The short-term problems could feed into long-term ones, which are being pushed to the back burner as EU officials deal with new immediate emergencies. Big euro countries like Spain and Italy are facing increasing financial difficulties as they have to pay ever higher interest rates to borrow money.

The head of Merkel’s Christian Democratic Union party’s economic council, Kurt Lauk, insisted that Cyprus not be allowed to take over the EU council presidency, which it is set to do July 1, because of its economic problems.

A country that for years did not do its own economic homework cannot exert such a function, Lauk said. The German foreign ministry immediately rejected that idea.

The Local/AFP/mw

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.