The Return of 'Madame Non': Why Merkel Remains Opposed to Euro Bonds

In September, Germany's Constitutional Court handed down a landmark ruling on the country's participation in bailout efforts for Greece and for other heavily indebted euro-zone countries. While the court allowed Berlin to go ahead on its planned support for the European Financial Stability Facility (EFSF), it made it clear that any additional moves to aid fellow euro-zone member states would be viewed negatively.

Specifically, the ruling clearly indicated that Germany's constitution frowns on any permanent mechanism to transfer German taxpayer money to foreign countries in the form of a bailout. The larger such payments are, the larger the frown. The court also specifically warned against a situation whereby foreign governments could trigger payments of German guarantees through their actions.

The court's primary concern was the German parliament's constitutionally anchored control over the country's budget. There was concern that, given the speed with which some bailout packages have been assembled in recent months as the euro zone slides ever deeper into crisis, the parliament was being side-stepped. In response, parliament has since established a committee to quickly analyze and approve any large bailout payments made by the EFSF.

But euro bonds would be an entirely different case. Wolfgang Münchau, the Financial Times columnist who recently began writing editorials for SPIEGEL ONLINE, points out that they would be everything that the German Constitutional Court finds questionable about bailout programs thus far. They would have the potential to make Germany liable for debts incurred by other countries in the euro zone, the program would be huge (otherwise there would be no point in introducing them in the first place) and German guarantees could be triggered by the actions of foreign governments. "The court's verdict leaves me no alternative but to conclude that (euro bonds) are indeed unconstitutional," Münchau wrote in the Financial Times in September.