Van Rompuy Proposes Single Bond, and is Rebuffed by Germany
25 May 2010
Herman van Rompuy last week proposed a single European bond to finance ministers, according to FT Deutschland, but said the response had unenthusiastic, citing Christine Lagarde. The paper said Germany vehemently opposed such a bond on the grounds that it would increase domestic borrowing costs. Likewise, van Rompuy said Germany’s proposals for an orderly bankruptcy of member states have no support in the eurogroup. So it looks we are stuck. The paper said van Rompuy had four priorities: early fiscal planning, reform of the sanctions regime, internal imbalances, and crisis resolution.
At each others throats
It looks as though we have reached the moment when EU leaders are making the straight transition from complacency to panic, as Jose Manuel Barroso now starts to attack Angela Merkel, his protégé, for failing to explain the politics of the euro rescue package. He did so in an interview in Frankfurter Allgemeine, in which he also criticised the German government’s proposals for a reform of the stability pact as “naive” on the grounds that there is no way the EU is going to withdraw voting rights from fiscally irresponsible governments. (On this point, we are in rare agreement with Barroso. Merkel and her incompetent advisers keep on making unbelievably silly proposals, including most recently the financial transactions tax. Barroso’s intervention tells us that they are beginning to panic over the fact that there latest “historic” rescue package has also completed failed to resolve anything).
Teutonic tectonics? What is Germany trying to build, a new European order?
2 Responses to “Van Rompuy Proposes Single Bond, and is Rebuffed by Germany”
May 31st, 2010 at 1:05 pm
On the positive side, post WWII Germany has been devoted to the stability of its currency, and has been willing to do anything to make this a certainty. Underline, Anything.
Here comes Greece.
I think the Germans are making all of the internal political steps necessary for removing themselves from the EMU.
June 11th, 2010 at 7:18 am
The banknote printers would love it especially as most are German or using German (or Swiss) presses:-) However, it’s a lost cause because Germany would lose all the export (outside eurozone) benefits of a weak euro FX rate.
Exports of Mercedes, BMW, Porsche (aka VW), Opel to EUR countries would plummet and stay low for a while. German banks would have to take even bigger haircuts on their myriad sovereign loans denominated in euros. Bad plan.
Austerity is this year’s financial buzzword, but politicians rarely have the balls when facing re-election.