GERMAN CHANCELLOR Angela Merkel has dismissed eurobonds as the “absolutely wrong” cure for the euro zone’s ills, amid growing political pressure from her junior coalition partner to toughen her stance towards Greece.
Rebels within the Free Democrats (FDP), already predicting a Greek default and its euro zone exit, are demanding the party withdraw its support for a December vote on the euro zone’s permanent crisis mechanism (ESM).
A day after European Commission president José Manuel Barroso promised speedy proposals on common euro zone debt bonds, the German leader insisted the idea was a non-starter.
“To achieve a common interest rate, you need similar competitiveness and budget situations – not collectivised debt,” she said yesterday in Frankfurt. “This would run the risk of punishing countries with solid finances and commending other countries even if they don’t implement the structural reforms they have ahead of them.”
Philip Rösler, economics minister and leader of the FDP, has refused to heed warnings from Dr Merkel over his remarks raising the possibility of a Greek insolvency.
“We belong to different parties and have a responsibility to view things with a view to common action, that’s the way coalitions are,” said Mr Rösler, deputy chancellor in the government, insisting there could be “no taboos” in the euro zone debate.
“I have to speak openly, particularly in my position. People expect honesty from the government.”
His remarks have drawn a mixed response in his party and a negative reaction from German economists and opposition politicians, who describe it as an attempt to boost critically low domestic support.
Dr Michael Hüther, head of Cologne’s German Economic Institute, described the FDP’s Greek insolvency debate as “irresponsible”.
“In the current situation, politicians can’t philosophise in public on whatever occurs to them,” he said.
Social Democrat (SPD) parliamentary leader Frank-Walter Steinmeier called for greater discipline from the ruling coalition.
“We are the largest economy in Europe and everyone is looking to us,” he said. “For that reason one cannot just talk as if at the kitchen table.”
Meanwhile FDP rebel Frank Schäffler has collected nearly half of the 3,500 member signatures required to force a party motion on the ESM before its expected parliamentary vote in December.
The motion calls on the party to “reject the creation of an unlimited ESM. The party will withhold its support in the Bundestag and reject the required changes to the European treaties.”
Explaining his motivation yesterday, Mr Schäffler said that through ESM, Germany was “allowing itself be blackmailed by the fear of a financial market collapse into an economic planned economy and political centralism”.