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Germany’s Chancellor Angela Merkel has repeated her nation’s rejection of a common euro bond market as a solution to the financial crisis gripping the euro zone following a failed bond auction on the part of Germany to raise money for the joint effort to save the common market currency. The German focus has remained on debt reduction and tighter integration of euro zone economies rather than in a common bond market; however, warnings from domestic actors in Germany, like Sebastian Dullien of the European Council on Foreign Relations, suggest that the question of the euro’s survival increasingly hinges on euro bonds else the breakup of the euro zone as currently composed is imminent. The lukewarm response to the German bunds auction demonstrates a marked lack of enthusiasm for a process without clearly definable means to achieve its goals: namely, Angela Merkel’s policies of not allowing the European Central Bank to be the lender of last resort coupled with Germany’s lack of desire to issue common euro bonds have led to the inevitable questioning of the viability of the entire euro project. Germany’s Economy Minister Philipp Roesler rejected euro bonds on two basises: one, it would force German taxpayers to be responsible for the profligacy of other member states (like Greece) and two, it would raise the costs of borrowing for German businesses (even though German business has benefitted handsomely from the common currency). Meanwhile, France advocates for an increased role for the ECB and making it the true lender of last resort for the euro zone. This would allow the ECB to absorb some of the sovereign debt from nations like Greece and Italy, providing a common, joint mechanism for salvaging domestic economies under the euro.

 

[Bloomberg]

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