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Why is Germany against the lauching of Euro Bonds?
At this moment every country in Europe can issue and sell individual bonds in the markets. France's new President favors the launching of collective bonds issued by the European Central Bank. These new bonds would be useful to help weaker countries of Europe to overcome the present financial crisis.
So, why is Germany against it?
Stephan Unger
First I have to apologize for my bad english :)
The reason why Germany does not want Euro Bonds is because of the current economic situation, which is very good. If a country has a very good economy it can sell bonds for a very low interest rate. In fact currently we are selling our bonds for 0 percent interest. Greece for example has to pay a very high interest of up to 7 percent. If you would establish Euro Bonds every country would have to pay the same interest rate (lets assume it will be 4 percent). This means that the strong countries would subsidise the weaker countries because they waive their advantage of getting money for very low interst rates.
Since there is only a common currency but no common fiscal politics by the European Union Germany fears that Greece will use the advantage not to reform their state but to keep going on with making a lot of debt to sustain their economy.
Germans are very sceptical towards the Greeks because it turned out that their financial data they had to show when joining the European Union was fake. Not a very nice starting point. In addition to that they used the benefits of the European Union (getting money cheaper) not to reform their economy but to increase their standard of living while still having a very weak economy. That is why a lot of Germans don't want Euro Bonds.
(This is not neccecerialy my own opinion about Greece but it wanted to explain how the majority of Germans think)
Krisztián Pintér 200+
Heather White 10+
All will become clear if instead of reading "European Central Bank" you read it as "German Central Bank". The ECB is located in Germany (Frankfurt), is run by Germans for the benefit of Germany (but don't tell the other 16 Euro Zone countries).
The Euro Zone currency (The Euro) has been an important advantage for Germany - it is the reason why their economy is doing so well. Indeed, in my opinion if Germany had won WW2 they could not have set up a better financial system as the current one. The low value of the Euro (kept low due to the weaker Southern European economies) has made German exports very, very cheep so exports are booming in areas like China, India and South America. Germany has low unemployment and a balance of payments surplus. Indeed, if you balance the German economy agaist the weaker economies of Greace Iraland, Portugal, Spain and Italy the Euro Zone, as a whole, would still be okay.
It's a question of maintaining this advantage as to why Germany doesn't want the ECB to issue Euro Bonds - as it would, ineffect, make the ECB the lender of last resort - i.e. all the Euro Zone countries (including Germany) would become liable for the Zones debts. You see, the single currency is really a con trick. The ECB is not like the Bank of England - which is the lender of last resort. Each Euro Zone country is responsible for its own debts - except it can't act to reduce this debt by devaluing or printing more money - as it is this aspect of their soverenty that Euro Zone countries have given up in order to join the Euro club (headed by.... Germany)
R H 20+
Debra Smith 200+