ANALYSIS:A reluctant Germany is likely to accept there is only one way to prevent the euro collapsing, writes DEREK SCALLY
BERLIN OFFICIALS have warned that today’s Franco- German talks in Paris will not deliver “a political stroke” to end the euro zone crisis.
Chancellor Angela Merkel’s spokesman insisted yesterday that the latest focus of media and market attention – so-called “eurobonds” – wasn’t even on the agenda.
“We don’t plan on mentioning eurobonds – for us it’s simply not a sensible idea – and we have no indication from the French side that it will be a theme of the talks either,” said Steffen Seibert to journalists in Berlin yesterday.
Unfortunately for Berlin, the eurobonds issue refuses to go away, a reflection of growing acceptance behind German closed doors that this is the direction in which the euro zone debate is headed.
Eurobonds would replace sovereign bonds, pooling euro zone risk to reduce refinancing costs for members such as Greece and Italy. But borrowing costs would rise for countries such as Germany and the Netherlands, as a common eurobond could cost them their top triple-A rating.
Given this extra cost – €47 billion alone for Germany annually, according to one estimate – the discussion of this once-taboo issue shows how far the crisis has dragged even Germany from its comfort zone.
Accompanying the eurobonds talk in Berlin is an expression that sums up the mood: “Rather a calamitous end than endless calamity.”
For Germany, the endless calamity would be the collapse of the euro, not least because a new deutschmark would rapidly appreciate in value and German products abroad would become more expensive, strangling the country’s crucial export market.
The alternative, the calamitous end, would be to agree – at least in principle – to the idea of the eurobond.
“The alternative is the markets attack Italy, then France, we lose our AAA-rating and then it’s our turn,” said Anton Börner, head of Germany’s BGA export association yesterday. “This is a downward spiral that would lead to a worldwide depression. We’ll end up paying three times over. This way we pay just once.”
The eurobonds idea has the backing of the opposition Social Democrats – with one important caveat. “States that use eurobonds would have to agree to give up a degree of sovereignty over their own budgets,” said its leader Sigmar Gabriel on German television.
Last week, French president Nicolas Sarkozy promised today’s meeting would present “extremely ambitious euro zone governance proposals”.
The French leader is anxious to move attention away from French banks and Merkel agreed to come to Paris as a favour to this end. Officials in Paris say the two leaders will discuss proposals for regular euro zone leader meetings – a long-held French wish – and may propose European Council president Herman van Rompuy as a new euro spokesman.
German officials say no concrete measures can be expected beyond regulatory ideas to “boost stability and trust” in the euro zone.
Berlin officials are annoyed but not surprised that the hyperactive French president is anxious to present new proposals before last month’s summit conclusions have even been enacted.
“The point is to be patient until countries are ready to make the leap themselves,” said one senior German official, referring to closer fiscal union and EU oversight of national budgets.
“Look at what’s been possible so far – in Greece, in Italy – we’re not going to get treaty change through in five days.”
Merkel is anxious not to become the political leader on whose watch the EU crossed the Rubicon to become a permanent “transfer union”, with one euro zone member liable for another’s debts. German voters were promised this would never happen when the deutschmark was swapped for the euro.
