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Germany opposes joint issuance of euro bonds

11-24-2011 14:05 BJT

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As the European Commission pushes for jointly-issued eurobonds by euro zone members, German Chancellor, Angela Merkel, has immediately reiterated her opposition to the plan. But some economists say the introduction of these so called "stability bonds" is the only way to end the debt crisis.

Germany’s strong economy has held up relatively well despite the debt crisis swirling around Europe.

But analysts said the first signs it was beginning to threaten Berlin came on Wednesday - when Germany had one of the worst bond sales since the launch of the euro.

It still costs Germany significantly less to sell its debt than all its euro zone neighbors, but the Bundesbank was forced to buy large amounts of the bonds to ensure the auction didn’t fail.

This, on a day where the European Commission discussed the introduction of eurobonds - an idea German Chancellor Angela Merkel once again rejected.

German Chancellor Angela Merkel said: "I find it extraordinarily inappropriate that the European Commission is focusing today on eurobonds, different kinds of them, giving the impression that the debt burden can be shared and that we can get rid of flaws in the structure of the European currency. That’s exactly what won’t work."

The European Commission has put together a study with suggestions - but no recommendations - about how to end the crisis and calm the markets.

It was presented by European Commission President Jose Manuel Barroso and Commissioner for Economic and Monetary Affairs Olli Rehn.

The proposals include tighter control of euro zone countries’ budgets and closer economic monitoring.

It could also - eventually - lead to euro zone members jointly issuing what they call "stability bonds".

European Commission President Jose Manuel Barroso said: "If implemented in the right way, the joint issuance of debt in the euro area could bring tremendous benefits. It could lead to greater financial integration and the creation of a much larger and more liquid bond market, comparable to debt which exists for the United States Treasuries."

Germany’s firmly opposed to the idea, as it could end up carrying most of the costs and it fears it’d take the pressure off countries to get their finances under control.

But one Frankfurt trader think it’s only a matter of time.

Frankfurt trader Dirk Mueller said: "It’s not that they’re the solution, but currently, there is no other solution. Eurobonds only make sense if there is a common budget management in which case a common account makes sense. Everything else leads the community as a whole into disaster but since it appears there is no other solution, this solution will likely be pulled out of the hat as a last resort."

Many say the crisis is threatening the euro zone’s core because it has gone on so long, so some kind of last resort solution is long overdue.

 

Editor:Zhang Rui |Source: CNTV.CN

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