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

There were some who thought that Angela Merkel might soon soften her stance on euro bonds. But on Thursday, the German chancellor once again emphasized her opposition. Why, though, is Berlin so adamantly opposed to issuing joint euro-zone debt? SPIEGEL ONLINE offers an overview.

Chancellor Angela Merkel doesn't like euro bonds.

Chancellor Angela Merkel doesn't like euro bonds.


Angela Merkel's response could hardly have been clearer. European Commission President Jose Manuel Barroso on Wednesday presented a study outlining the possible forms euro bonds could take -- whereupon the German chancellor found unusually unambiguous words in response. The proposal, she said, was "extraordinarily distressing." She also called it "inappropriate."

The reaction was unusually firm for Merkel. She has become notorious in Germany for shying away from positions that can't be wriggled out of later. But when it comes to pooling the debt of all euro-zone member states in the form of euro bonds, she has long been firm in her rejection. In December 2010, for example, she said "the euro zone needs more harmony and competitiveness rather than common euro-zone bonds." In September, she called euro bonds "absolutely wrong." Wednesday's outburst, in other words, should not come as a surprise.

There are those, of course, who think that, in the end, Germany will have no choice but to put its own AAA credit rating on the line to ensure that other members of the European currency union have access to cash at reasonable rates. Borrowing rates for several euro-zone countries have risen alarmingly in recent weeks -- including yields for countries like France and Austria that had long been considered financially solid. Both Spain and Italy have seen borrowing rates spike to near or above 7 percent, the amount analysts consider to be the limit for sustainable long-term borrowing.

'Weaken Us All'

Indeed, on Thursday, media reports indicated that some within Merkel's governing coalition -- pairing her conservatives with the business-friendly Free Democratic Party (FDP) -- are no longer ruling out the introduction of euro bonds. "We never say never. We only say: No euro bonds under the existing conditions," Norbert Barthle, budgetary spokesperson for the conservatives in parliament, told the Financial Times Deutschland.

Merkel, though, would seem to have put a stop to such speculation on Thursday. Following a meeting with French President Nicolas Sarkozy and Italian Prime Minister Mario Monti in Strasbourg, she told reporters euro bonds "would weaken us all."

Germany has largely isolated itself in the ongoing European discussion over what steps should next be taken to confront the euro crisis. Governments across the Continent are clamoring for a solution. And analysts around the world have come to the conclusion that the spread of Europe's ongoing debt crisis can only be halted by implementing one -- or both -- of two methods: Either debt must be pooled in the form of euro bonds, or the European Central Bank must become the lender of last resort by buying up massive quantities of sovereign bonds from indebted euro-zone members.

Virtually all euro-zone members have thrown their support behind one of those two antidotes. Germany, though, has firmly opposed both. Berlin fears that massive ECB bond purchases could significantly drive up inflation (indeed, it evokes fears of 1920s hyperinflation in the country) and sacrifice the independence of the Frankfurt institution, which was modelled after the German central bank, the Bundesbank, that for decades served as guardian of the highly stable deutsche mark. And it's opposition to euro bonds? SPIEGEL ONLINE provides an overview of the most important reasons.


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