FRANKFURT (MNI) ? Germany?s government is edging nearer towards
accepting the need for a collectivization of debt in order to preserve
the Eurozone, according to a report in the German newspaper Welt am
Sonntag.
The paper cited a German government source as saying the
preservation of the Eurozone with all its members is an ?absolute top
priority.?
Under the headline ?Government no longer rules out European
transfer union and joint euro bonds as last resort,? Welt am Sonntag
cited the source as saying: ?In case of emergency, one would even be
prepared to accept the introduction of a ?transfer union? and at the end
of the day even joint Eurozone bonds.?
?Without these euro bonds, it might no longer be possible to save
the Eurozone,? the source was quoted as saying. ?The direction we have
taken so far with rescue packages for financially debt-burdened states
is beginning to reach its limits.?
The report comes in the wake of comments by Italian Economy
Minister Giulio Tremonti who on Saturday again called for the
introduction of a joint euro bond, saying they were the ?master
solution? to the Eurozone debt crisis.
Tremonti?s appeal evoked little sympathy from German counterparts,
who were quick to dismiss the idea of a common euro bond.
In an interview with the German daily Handelsblatt, due for
publication on Monday, Philipp Roesler said the introduction of a joint
eurobond would result in higher borrowing costs, which would have to be
borne by the German taxpayer.
?In a Europe where each member state should take individual
responsibility, I believe a common euro loan to be the wrong path,?
Roesler told the paper.
Roesler called for member states to instead create a culture of
stability in Europe. ?Whoever aspires to such a culture of stability
must also set the incentives so that a sound fiscal policy will be
implemented in all member states of the euro area,? Roesler was quoted
as saying.
?A common euro bond would remove any incentive for a very sensible
and sound fiscal policy,? he said.
?Countries which adopt unsound fiscal policies would be rewarded
and those who consolidate their budgets responsibly would be
disadvantaged,? said Roesler.
German Finance Minister Wolfgang Schaeuble also made his objection
known to a joint euro bond in German weekly Der Spiegel magazine a day
earlier.
?Such bonds would undermine the basis for the single currency by
weakening fiscal discipline among member states,? Schaeuble told the
magazine.
?I rule out euro bonds as long as member states conduct their own
financial policies, and we need differing interest rates so that there
are possibilities of incentives and sanctions to force fiscal solidity,?
he said.
German Chancellor Angela Merkel and French President Nicolas
Sarkozy will meet next Tuesday in Paris to elaborate joint proposals to
strengthen economic governance in the Eurozone.
The meeting comes against the backdrop of last week?s
unprecedented market turmoil that saw huge gyrations in global markets
and sparked the biggest flight to safety since the collapse of Lehman
Brothers.
Last week also saw the European Central Bank step in and buy
Spanish and Italian bonds, while the US Federal Reserve vowed to keep
interest rates at zero for another two years.
?Frankfurt office: +49-69-720 142; email: frankfurt@marketnews.com
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