Merkel: No Eurobonds for You!
Well, this seems to be the line she’s holding. According to Reuters, there will be no Eurobonds any time soon:
(Reuters) – Germany’s Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that Europe would not have shared total debt liability “as long as I live”.
The chancellor said there would be no shared liability of debt in Germany either – after her government agreed plans with federal states to issue joint “Deutschland bonds” – in comments reported by participants in a meeting with the Free Democrats (FDP), junior partners in her centre-right coalition.
So expect more indecisiveness, more uncertainty, more depression and more trying to make Europe fit in a currency union that is unworkable as is.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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21 Comments
the debt bubble, now, has shown how unworkable it was from the very beginning.
i can just imagine how young you could retire in greece, france or italy 10 years from now if germany were to extend its credit umbrella to the piigs………possibly as young as to never start work in the first place.
the german GDP hit from a EU breakup will be pennies on the dollar compared to the cost of further ‘enabling’ the piigs nannystates.
sooner or later, the sanity of straight addition and subtraction will be employed around the world instead of fractional leveraging.
homo sapiens’ ability to maximize their ‘take’ from any set of circumstances led to the extinction of at least two other late hominid species.
so i have no doubt that humans will find their way back to robbing tomorrow for today again in a decade or two……the interval decreases…….’enough of anything…… is never enough’ ……..for us.
she should not have used the words..”as long as I live”.
Your name doesn’t have to be Soros to figure out what the next secret meeting in France will be about. What do the Italians do best???(yes..those are my people)
So evil and yet diabolically cunning.
Interesting interview with Michael Pettis.
http://mcalvanyweeklycommentary.com/wp-content/uploads//ica2012-0620.mp3
He also comments on eurobonds.
I heard on Bloomberg TV that Angela Merkel was misquoted on this. I got the impression that she is still negotiating, and maybe she said this in order to get concessions from the others. But i think she has backtracked a bit.
Thanks Larry. I hadn’t heard that. If you hear some more please let me know.
It may have been mis-quoted or lost in translation, but the general message is correct.
Germany will not agree to the pooling of debt until some sort of fiscal union.
And they will only agree to fiscal union on their terms – i.e. not until everyone else in Europe behaves more “German”.
This to me is the critical thing to understand – any move closer to fiscal union will require Germany REDUCING its influence. Unless they had some overriding veto power (something the rest wouldn’t agre to) a fiscal union right now would mean France, Italy and Spain gang up and have the votes to say to Germany “too bad what you want, you’re out-voted”.
That’s why any real fiscal union is not happening – because Germany will not give up anything until the rest can be trusted to be “German” – and that’s simply not going to happen…
Frau Merkel needs to bring back the Reichsmark, and tell the EU auf wiedersehen.
Also I don’t think anyone would be comfortable with unelected people in other countries making decisions for them. How would you sell that to any voter?
Indeed – they won’t surrender sovereignty to unelected officials.
Of course the ultimate goal of “fiscal union” would be to form a EU parliament of officials elected by the individual countries. What a long road it would be planning how that would work. And once again it would mean Germany having LESS power because they could be out-voted by the others…
Cullen, here is a link from The Economist that makes it sound like negotiations are still ongoing, and Merkel may be open to a compromise.
http://www.economist.com/blogs/charlemagne
Merkel won’t compromise – she can’t compromise. She will happily keep the door open by saying certain things, but at the end of the day Germany isn’t signing up for anything until they are satisfied everyone else thinks the same as them.
Her motto is basically “lets work as a team and do it our way – your views don’t count”
This would be the 1st time ever Merkel made a bold, absolute statement, ontop of that connected with her person. I seriously doubt she said that.
And even if: she has already drawn a myriad of red lines in the sand, without exception all of them were quietly erased later on.
I think she was referring to Italy beating Germany.
They should wager eurobonds.
Then if Germany plays Spain. Loser should exit the euro
Silvo Berlusconi wants to make his comeback on a platform of Italy returning to the Lira. I think we should root for the old Caesar wannabee here.
“Angela Merkel says Germany will not agree to pool sovereign debt or share banking liabilities with other countries until there is greater political union. François Hollande says France cannot accept the loss of sovereignty without greater solidarity. So today Herman Van Rompuy, the president of the European Council (who chairs European summits), issued a report that tries to split the difference: there should be both joint liabilities and more European-level control of national policies.”
Sounds to me as if it is possible that Merkel might agree to a compromise on Eurobonds IF, and the if is important, there are serious moves made toward a fiscal union with real power in the European federal authority.
No. Merkel will only compromise (or agree to anything) when they are satisfied the new “European federal authority” thinks exactly like Germany. If not, Germany are actually worse off under the new “euro authority” because they will be out-numbered.
She’s not going to totally dismiss everything. I believe she actually wants fiscal union. But, and THIS is the critical but, only if everyone is going to behave like Germans.
I think that if you watch the EUR/USD exchange rate, that will tell you how this week’s summit is going, and the prospects for a somewhat successful summit.
If Merkel really had slammed the door shut on any chance of Eurobonds, then I think you would see a EUR/USD fall below 1.240 . Now it is about 1.2483. Since the Euro hasn’t broken down completely, I think the negotiation also have not broken down.
About real fiscal transfers, not loans!
http://www.economonitor.com/blog/2012/06/what-fiscal-union-means/?utm_source=contactology&utm_medium=email&utm_campaign=EconoMonitor%20Highlights%3A%20Steering%20the%20Ship%20of%20Fools%2C%20U.S.%20Paradox%20of%20Attitudes%2C%20World%E2%80%99s%20Most%20Secret%20Real%20Estate%20Bubble
Please, shock the system, Ms. Merkel – and, then on to the healing game. Finally, the dramatic could precede the serious challenges of accountability by all – kinda like an economic world war, and resulting in a new order where dodging responsibility will place a sovereign in the dung house.
For the 19th time, and 19th EU summit, the whole world economy supposedly hangs in the balace. Again EU leaders will take incremental steps to firm the union but I doubt there will be any grand solution because one does not exist. The only thing that matters now is whether policy makers give the ECB enough cover to act. I bet they will do just the bare minimum as always, the ECB will act, and markets will move to another risk on phase. Three months later we will be back at yet another make or break summit.