WHILE ANGELA Merkel won French backing for treaty change in Strasbourg yesterday afternoon, her officials back home in Berlin took the first steps towards a brave new world of eurobonds.
Senior members of her ruling Christian Democratic Union (CDU) have begun to admit in public what they have long conceded in private – a common debt pool is the price Germany must pay for euro zone stability through tougher budgetary oversight.
“We never say never,” said Norbert Barthle, CDU head of the Bundestag budgetary committee, when asked about eurobonds. “But I’d say unambiguously: the introduction of eurobonds is not on the agenda at present. What we need much more are clear and binding stability guidelines for euro zone members.”
After months of outright rejection by government officials, there was a definite softening of rhetoric yesterday in Berlin towards European Commission proposals for pooled euro zone debt.
“The discussion started by the commission is not fundamentally bad, but it comes at the wrong time and mistakes the order required,” said Mr Barthle.
Dr Merkel’s coalition partners remain more strident in their opposition to eurobonds in public.
“Eurobonds are interest rate socialism and socialism is always the wrong way to go,” said Rainer Brüderle, Bundestag floor leader for the liberal Free Democratic Party (FDP).
Alexander Dobrindt, general secretary of Bavaria’s Christian Social Union (CSU), dismissed talk of eurobonds and attacked European Commission president José Manuel Barroso as the “mercenary of dolce vita country anxious to get at our tax money”.
Behind closed doors, however, even Dr Merkel’s junior partners concede the time is coming to make a move. Resistance to eurobonds has been particularly strong in the liberal FDP, where the concept of pooling euro zone debt is a difficult sell to its large entrepreneur voter base.
“But thinking is in flux and there’s a growing realisation of the need to help bailing water from the leaky boat,” said an FDP official on condition of anonymity. “The realisation is growing here that this is not something abstract, that Germany can be seriously affected by this.
Wednesday’s failed bond auction has helped concentrate minds. Though viewed far less dramatically here than elsewhere there was agreement that the lack of interest in German sovereign debt was a “warning shot”.
Eurobonds remain an emotional and divisive issue. The influential Industry Federation (BDI) remains fundamentally opposed to the idea; president Hans-Peter Keitel warned Dr Merkel to “stick to her position” on eurobonds.
Economists are divided: claims by Munich’s Ifo economics institute that eurobonds would cost Germany €47 billion a year in extra interest payments have been dismissed as fanciful by others.
Concerns over the bund debt auction lifted yesterday with news of a rise in German business confidence. The closely watched Ifo index, compiled from surveys of 7,000 German managers, rose to 106.6 from 106.4 in October.
“Downside risks remain, certainly, but doomsday is not around the corner,” said Andreas Reese, chief economist at Unicredit. “A recession, especially a deep and nasty one, is not in the pipeline.” Record-low unemployment and rising consumer spending have helped ease the pressure on German domestic finances.
But questions remain about Dr Merkel’s proposals for treaty change. Senior CDU officials said that, technically, creating eurobonds will not require treaty change from Berlin’s perspective. However eurobonds would not be acceptable without closer political-fiscal union, which does mean treaty change.