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Thursday, December 09, 2010

Don't Touch My Eurobonds

A couple of weeks ago, Eurogroup Chairman Jean-Claude Juncker politely suggested that "in Germany, the federal and local authorities are slowly losing sight of the European common good." But after Berlin mercilessly slammed his beloved idea for a common eurozone bond, Juncker has decided to step up his rethoric another notch.

In an interview with German weekly Die Zeit, published today, he says that Germany's thinking on Eurobonds is "a bit simplistic", and argues:

They [the Germans] are rejecting an idea before studying it [...] 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.
A sharp reaction to Juncker's comments arrives from FAZ, the solid German conservative daily. A leader in today's paper argues:
Apparently, it is un-European to raise taboos. Is it, however, European to bend EU treaties and break the ban on bail-outs? When a Eurobond is issued [...] countries with a bad name can enjoy lower interest rates, countries with better solvency are paying the price for that. These mathematical financial facts are real, whatever else Juncker may state.
An article in Der Spiegel further unpicks Juncker's silly definition of what constitutes a good European. According to a German government official, eurobonds would increase interest by one percent for Germany - which would add an extra €480m for every €48bn the country borrowed. Luxembourg would not have that problem, since it doesn't really have to borrow.

As the government official said, "Is this what being a good European means?"

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