Eurogroup head attacks 'un-European' Germany

8th December 2010, Comments 0 comments

Eurogroup chairman Jean-Claude Juncker called Germany's flat rejection of his proposal for joint eurozone bonds "un-European" on Wednesday, prompting an angry reaction from Berlin.

Juncker, also Luxembourg prime minister, told German weekly Die Zeit that Berlin had not even properly looked at his proposal, which was aimed at helping weaker eurozone members raise money, before deciding to oppose it.

"Germany's thinking was a bit simplistic on this," he said.

"They are rejecting an idea before studying it. This is very strange. This way of creating taboo areas in Europe and not dealing with others' ideas is a very un-European way of dealing with European matters," he said.

Berlin responded tersely by accusing Juncker of unsettling markets.

"It doesn't help anyone in Europe if European figures call each other un-European," Chancellor Angela Merkel's spokesman Steffen Seibert told a regular government briefing.

"It is exactly this talking against other people and about other people which should stop, because the markets definitely see this finger-pointing as a sign of disaccord."

Such collective "E-bonds" could help eurozone members seen by investors as having shaky public finances lower their borrowing costs, since the bonds would be backed by other countries and therefore be seen as less risky.

Sky-high interest rates for Irish and Greek bonds contributed to both countries having to go cap-in-hand to the European Union and the International Monetary Fund this year for bailouts worth tens of billions of euros (dollars).

Rising yields or interest rates on bonds sold by other members of the 16-nation currency union including Portugal and Spain have raised fears that they too will need to seek help.

But at a meeting of eurozone finance ministers this week, Germany was adamant that it thought Juncker's idea, which won backing from Italian Finance Minister Giulio Tremonti, was not the way forward.

Germany has also put its foot down over increasing the size of the EU-IMF 750-billion-euro bailout fund despite fears it would be too puny if Spain threw in the towel.

Merkel has said joint eurozone bonds would weaken states' rigour in bringing their finances in order, something she sees as key to preventing another crisis. Spain and the Netherlands are also opposed.

"Interest rate competition is a way of getting (eurozone members) to stick to stability criteria," Merkel said earlier this week.

Germany, whose finances are seen as so solid that it currently enjoys among the lowest borrowing costs in Europe, fears that joint eurozone bonds could push its bond yields higher.

Berlin also worries that issuing such bonds would be blocked by Germany's country's highest court for being in breach of the "no bailout clause" of the European Union's governing treaties.

German Finance Minister Wolfgang Schaeuble has said the bonds were impossible "without fundamental changes" to these agreements.

Merkel's spokesman added that a "whole range" of other eurozone states were also opposed to the idea.

"Eurozone bonds represent a different Europe from that which is anchored in European treaties," he said. "It is not Germany that had a problem with this ... Let us not see this as just a German problem or a German concern."

© 2010 AFP

0 Comments To This Article