Angela Merkel has once again rejected the idea that Eurobonds issued (and guaranteed) by all Eurozone members could be used to finance the common currency union’s weaker brethren. Whatever the rights or wrongs of that stance (which is unlikely to thrill markets tomorrow), it was (mildly) amusing to see Merkel coming out with this (via the Daily Telegraph) as a partial explanation for the position she was taking:
The German Chancellor said the issuance of eurozone-backed bonds was “exactly the wrong answer” – despite warnings that it is the only move that will calm stricken markets. Ms Merkel told German television yesterday: “The markets want to force us into doing certain things – and that we won’t do.” She added: “Politics cannot and will not simply follow the markets.”
Yes and no, I’d say, but if those members of the EU’s leadership (and specifically Merkel’s once-upon-a-time mentor, former German chancellor Helmut Kohl) responsible for the introduction of the single currency had paid more attention to the politics of the euro, and more specifically, the need to get widespread democratic buy-in for a project of this scale, then Europe would not now be sliding towards catastrophe in the way that it now is — for the simple reason that the euro would almost certainly never have been launched in the first place. German voters would almost certainly have said no to a currency so poorly, shabbily and dishonestly conceived that even the most shameless of Wall Street’s CDO salesmen would have paused before inflicting it on their clients.
Now, however, “politics,” real politics, are back – and with a vengeance.
The Economist reports on some of the latest developments:
“I support the euro, but not at any price,” said Wolfgang Reitzle, chief executive of Linde, an industrial-gas producer, in a recent interview. He is not alone. Many German business leaders are wondering if the apparently never-ending euro-zone bail-outs, to which Germany is the biggest contributor, are beginning to outweigh the (considerable) advantages of the single-currency area [for German exporters]…
Many business leaders complain that the government, which yokes together the conservative Christian Democrats (CDU) with the pro-business Free Democrats (FDP), is plagued by in-fighting. The CDU wants to keep taxes high to help reduce the budget deficit. But the FDP insists that reducing the burden on taxpayers was part of the deal they agreed when the parties formed their supposed “dream-team” after elections in September 2009.
Now differences over the euro are adding to the headache. In September Mrs Merkel must secure parliamentary ratification of a deal she agreed with other euro-zone leaders in July to expand the powers of the single currency’s bail-out fund. Dissent from some FDP deputies, and even from within the CDU itself, could force her to rely on support from the opposition…
Yet however disgruntled Germany’s business leaders may be, they are not the only cause for Mrs Merkel’s concern. During her recent walking holiday in the mountains of south Tyrol a number of CDU heavyweights, fearing drift and a loss of the party’s identity, called for an emergency party congress. A poll of members of the CDU and its sister party, the Christian Social Union (CSU), found that most are against bailing out euro-zone countries. The German press, meanwhile, has been wringing its hands over the European Central Bank’s decision to buy Spanish and Italian bonds…. Many Germans see the purchases as a dangerous deviation from orthodox monetary policy, and a step towards fiscal support.
As it happens, Merkel would almost certainly get the support she needs from opposition parties to force through support for July’s absolutely final Greek bailout, but not without just the sort of acrimonious delay that is highly likely to alarm markets still further.
That “Northern Euro” is looking better and better as the first step in exiting this mess. Needless to say, there is still no sign that is on the agenda.