Merkel Says She’ll Resist Pressure for Euro Bonds

[dkf]

German Chancellor Angela Merkel attempted to shut the door on common euro-area bonds as a means to solve the debt crisis, saying that she won’t let financial markets dictate policy.

Joint euro bonds would require European Union treaty changes that would “take years” and might run afoul of Germany’s constitution, Merkel said today. While common borrowing might arrive at some point in the “distant future,” bringing in euro bonds at this time would further undermine economic stability and so they “are not the answer right now.”

“At this time -- we’re in a dramatic crisis -- euro bonds are precisely the wrong answer,” Merkel said in an interview with ZDF television from the chancellery in Berlin. “They lead us into a debt union, not a stability union. Each country has to take its own steps to reduce its debt.”

Merkel has stepped up her opposition to euro bonds since returning from her summer vacation last week, making resistance to common European borrowing a campaign theme of Sept. 4 elections in her home state of Mecklenburg-Western Pomerania. Investor calls for euro bonds intensified last week as concerns about the debt crisis and a stuttering global economy drove European stocks to their lowest in more than two years.

“Politicians can’t and won’t simply run after the markets,” Merkel said in the interview, her first since returning from a three-week summer break. “The markets want to force us to do certain things. That we won’t do. Politicians have to make sure that we’re unassailable, that we can make policy for the people.”

http://www.bloomberg.com/news/2011-08-21/merkel-says-common-euro-area-bonds-would-bring-debt-union-not-stability.html

[DonCoquixote]

1. Of course she will

Germany loved the EU when it was about telling other Europeans what to do, but now that the fatherland has to chip in, he runs runs runs.

[OllieLotte]

4. Hey, you can chip in and buy bonds from the PIIGS.

Let me know how that works out for you.

[DonCoquixote]

5. You either have a United Europe

or you do not, period...and when the EU was the hottest new thing, Berlin, Paris and even London loved it, blowing smoke in our face and saying "we are the new superpower!"

[OllieLotte]

6. Maybe your idea of united is different from mine.

I'm not jumping off a cliff with a drunken bum.

[Yo_Mama]

2. Well, they can't cover the gap.

France and Germany only have so much more they can borrow; if they run up their debtloads much more, their guarantees for Eurobonds would be worthless.

Europe just won't face facts.

Germany did contribute the EFSF, but how can it cover over 400 billion more? Italy has over 1.8 trillion of debt out. And France is close to a credit downgrade itself.

Here is the French Treasury site:
http://www.aft.gouv.fr/?lang=en




This was in 2010:


Last Bundesbank monthly report - start at page 24.
http://www.bundesbank.de/download/volkswirtschaft/monatsberichte/2011/201106mb_en.pdf

[Hawkowl]

3. Bond holders are going to get a haircut

Sooner rather than later, the extortionist bondholders are going to have to eat it. Germany can't bail out every single European bondholder at full value.

Like all extortionists, the payment keeps going up. First it's "give us our money or I kill the Irish economy". The money is paid and, the Irish economy gets it anyway. Then it's "give us our money or I kill the Greek economy". The money is paid, and...the Greek economy is snuffed. Now, it's "give us the money or I kill Spain and Italy!". Germany, looks around at all the dead economies, and says....they are already dead. Fuck off, we are going back to the Duetschmark.

That is what is going on right now. It is similar to Bear Stearns/Lehman Bros/Goldman Sachs/AIG liquidity crisis of 2007-08, but with sovereign nations in the balance.