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More Speculation Of Merkel Coalition Mutiny Over Eurobonds

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Tue, 08/16/2011 - 08:17 | 1564750 Cult_of_Reason
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BERLIN—Germany and France are being forced to reconsider an unpalatable idea as the euro zone's debt crisis spreads to its core economies: Making the currency bloc as a whole responsible for its member nations' debts.

The idea of collective liability, often referred to as "eurobonds," has been floated various times since last year. Conservative politicians in Germany and other northern European countries have previously dismissed the proposal as a violation of the European ideal, in which countries cooperate but remain responsible for their own fiscal affairs.

But turmoil in recent weeks, including capital flight from Italian bonds and French bank stocks, has forced the naysayers to debate the proposal seriously for the first time. Officials in Germany and France admit they're running out of options to deal with the crisis. The strategy until now—consisting of national budget cuts and European rescue loans—hasn't restored creditors' trust in the euro zone...

...On Sunday, one of Germany's leading newspapers, Die Welt—whose center-right leanings put it close to the government's thinking—devoted its front page to explaining why eurobonds are a potential last-ditch measure to prevent the euro zone from collapsing. German media have seized on the issue, forcing politicians of all stripes to declare a position.

The German exporters' association on Monday called on the government to do whatever it takes to protect the euro, saying the U.S.'s credit downgrade has heightened fears that the debt crisis could hit any government. "All alternatives to eurobonds will cost us even more money in the end," the influential business lobby said...

...But the left-leaning opposition in both Germany and France broadly supports eurobonds. And the escalating crisis has repeatedly forced Ms. Merkel to cross previously announced red lines in order to save the European project.

Breaking up the euro would be ruinously expensive for Germany, Berlin officials say, as the resulting exchange-rate swings within Europe would ravage Germany's exports and banking sector...


Tue, 08/16/2011 - 08:48 | 1564811 Cult_of_Reason
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Pressure on Frau Merkel:

1. Powerful German banking lobby supports Eurobonds

2. Merkel’s opposition parties (on the left) support Eurobonds

3. Powerful German business lobby supports Eurobonds

4. France (Sarkozy) now after bear raids on French banks supports Eurobonds

5. Obama Administration, Fed, US Treasury, IMF, World Bank support Eurobonds

6. ECB cannot continue buying Italian and Spanish bonds for too long and will support Eurobonds

7. China supports Eurobonds and promised to buy the bonds

8. Etc.

Tue, 08/16/2011 - 08:57 | 1564839 M.B. Drapier
M.B. Drapier's picture

Yes: as long as the bulk of deputies from both the CDU and SPD can be relied on to vote for Eurobonds it's hard to see how domestic opposition is going to stop Merkel, isn't it?

Tue, 08/16/2011 - 09:04 | 1564857 Cult_of_Reason
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The majority was against TARP in the US, but eventually they passed it.

Tue, 08/16/2011 - 09:57 | 1565033 Youri Carma
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You make some very good points here but just for the balance: Dutch coalition partner opposes eurozone bonds

Not that the Dutch have to say much in the world of today.

See what happens. My bet is that the will ram those Eurobonds trough and ignore the populus as usual.

Tue, 08/16/2011 - 10:50 | 1565209 Dick Darlington
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Finland's Grand Committee decided this summer that Eurobonds will not be accepted. Ever. We'll see how they live up to their promises.

Tue, 08/16/2011 - 11:07 | 1565262 Cult_of_Reason
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According to CNBC in Europe, a Dutch minister has already changed his mind and made a public statement today, "it is worth considering the Eurobonds" (he used to be strongly against the Eurobonds before he received a couple of calls from "important" people).

Do not underestimate the power of well funded lobbies and well connected EU plutocrats/financiers to make any politician/bureaucrat to change his/her mind.

Tue, 08/16/2011 - 08:18 | 1564753 TruthInSunshine
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The EU & James Brown are DEAD, bitchez.

All the EU does is TALK TALK.

Tue, 08/16/2011 - 08:24 | 1564754 Snidley Whipsnae
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Schauble is the only clear thinker in the bunch... The rest are a bunch of career political fools that would see their country in ruins before doing the right thing for their own people... Just like American pols...

"Wolfgang Schäuble, Germany's finance minister, is sticking to the script that the EU's accord in July provides all the tools needed to tackle the crisis. "I'm ruling out eurobonds for as long as member states pursue their own financial policies and we need differing interest rates as a way to provide incentives and sanctions, in order to enforce fiscal solidity. Without this solidity, the foundations for a common currency don't exist," he told Der Spiegel."

Tue, 08/16/2011 - 09:57 | 1565031 Gunther
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A day before the Mercozy meeting the spokesman of the German government stated that Eurobonds will not be discussed.

That was in yesterdays news in German quality Radio (Deutschlandfunk.)

To me that looks like someone in the Government puts borders on Merkels ability to write cheques.

Tue, 08/16/2011 - 08:49 | 1564757 Mercury
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We're sort of at the point where Fannie/Freddie's implied guarantee became an explicit guarantee (another terrible idea in the history of socializing the downside of credit risk).

Eurobonds may be the last option when everything else fails but they will eventually be deployed because everything else will fail and less pain today will gladly be traded for unbearable pain tomorrow by central planners and Eurocrats.  If you're a member of Club Med you are now incentivized to look busy...but essentially do nothing to put your own house in order while you wait for the Eurobond to become reality. 

Short sighted core-Euro banks and businesses will also push for it as they freak out about future currency swings while real, well-reasoned opposition to the Eurobond on the (especially Germen) home front  will be steamrolled by an atmosphere of DEFCON-5 crisis even though they will be proven right in the end.  A short-lived and ultimately disastrous Eurobond will almost certainly come to pass.


Tue, 08/16/2011 - 08:51 | 1564818 Snidley Whipsnae
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If I were Merkle I would get as close to Russia as white on rice... wide open bilateral trade agreements, discussion of a new DMark for Ruble swaps, dropping of all excise, etc, and tell the PIIGS to take a flying fling.

Germany has proven that they can compete head up with the Chinese... something no other country in the world has done.

The PIIGS were only good trade partners as long as they were paying for their imports. Germany does not need to subsidize the rest of Europe.

Germany made an attempt to stabilize the region and prevent future conflicts by entering into a common currency with the PIIGS. The PIIGS have failed to live up to their end of the bargain. It's time for Germany to cut their losses... 

Tue, 08/16/2011 - 08:57 | 1564842 Mercury
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That sounds like the right thing to do and it's a possibility but I think the odds are against it...although I admit I don't have a very good grip on Merkle or German politics here.  I mean, look at what Switzerland is doing vs. what they should be doing vis-a-vis their currency. Switzerland.

Tue, 08/16/2011 - 10:02 | 1565056 Gunther
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To some extent that is happening, there is a Natgas pipeline through international waters from Russia to Germany. This way nobody else can turn the tap off. The deal was signed before Merkel and the pipeline gets built now. The German finance minister says Eurobonds only against loss of sovereignity. I do not think the other countries will value German support that high.

Tue, 08/16/2011 - 08:27 | 1564759 f16hoser
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Uncle Benny Funded Eurobonds! Compliments of the US Taxpayer! What's the problem?

Tue, 08/16/2011 - 08:29 | 1564761 gwar5
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So, will they or wan't they do the bonds? 

I thought the Germans were already sufficiently aware to reject this backstopping of Eurobonds.

We'll see.

Tue, 08/16/2011 - 08:30 | 1564766 lolmao500
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If she does backstab the german people, she need to be strung up like the commie she is. (which she is, she was high in the east german government)

Tue, 08/16/2011 - 09:17 | 1564913 sunnydays
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She works for the banks and not the people, as she has already shown.  The people have had enough, the fact it is even being considered is political suicide for her.  I can't imagine she will be reelected as it is. 

Tue, 08/16/2011 - 08:34 | 1564775 BandGap
BandGap's picture

Help me out here, who is going to buy these things? The ECB?

This is nuts.

Tue, 08/16/2011 - 09:13 | 1564875 Mercury
Mercury's picture

By some important metrics (like fiscal deficit & debt/GDP) it would be a sexier credit than USTs actually.

Tue, 08/16/2011 - 08:37 | 1564782 sulfur
sulfur's picture

World Bonds or Universe Bonds would be the best solution.

Allthough i seriously doubt Capt. Kirk has no softer toilet paper on board.

Tue, 08/16/2011 - 08:41 | 1564797 SheepDog-One
SheepDog-One's picture

What we need is just more shit to sell! Got to make attractive rates for space aliens, then maybe they wont invade us soon as Krugman thinks will happen, but instead buy our paper.

Tue, 08/16/2011 - 08:56 | 1564837 eurusdog
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I don't know if alien bonds exsist? I googled "alien bonds" and all I got were links to bails bonds for illegal aliens.

Tue, 08/16/2011 - 08:59 | 1564847 Everybodys All ...
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Beat me to it ...

Tue, 08/16/2011 - 08:37 | 1564785 oogs66
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Eurobonds just cannot get approved.  It would be total capitulation for Germany and France and real risk that they get dragged into the abyss

Tue, 08/16/2011 - 08:40 | 1564794 Jim in MN
Jim in MN's picture

Oooh, a keeper:

"Eurobonds are a sweet poison that leads to more debt, rather than less."

--Oliver Luksic, the FDP's Saarland chief, in Bild Zeitung

Tue, 08/16/2011 - 08:44 | 1564801 SheepDog-One
SheepDog-One's picture

Lets see....the Euro is a flop failed centrally planned currency that was doomed from the start because by design the most productive have to take up the slack from the least productive. Gee it seems no matter how they repackage simple socialism it always fails, so now lets repackage the Eurozone and sell bonds on the whole mess! 

What a stupid world.

Tue, 08/16/2011 - 08:50 | 1564814 shortus cynicus
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The simmering revolt in the Bundestag makes it almost impossible for Mrs Merkel to offer real concessions at Tuesday's emergency summit with French president Nicolas Sarkozy.

You see, democracy is a problem!


They all against ad wait for new bribes and gifts from financial "intrustry".

Exactly like green movements waiting for donations from big corporations.

Tue, 08/16/2011 - 09:09 | 1564878 Ricky Bobby
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Exactly, that is why the world loves China so much. They have solved the "democracy" problem. "See what central planning can accomplish", of course it helps to have 500 million slaves. Maybe that is the bitter truth of history - slavery works best. 

Tue, 08/16/2011 - 08:51 | 1564816 eurusdog
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This wouls definately be the biggest Euro debacle to date. Go Eurobonds!!! EURUSD 1.0000 by the end of the year as Germany pulls out of the Euro.

Tue, 08/16/2011 - 08:55 | 1564828 Manipulism
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Someone has an other opinion about this:


I would like to thank our European readers for sending the solution for Europe is to consolidate all the debt into a single Euro Bond. This is the first step in trying to save Europe next comes the debt reform. First, we have to stop the meltdown if that is not possible, we will eventually see war as everyone will blame everybody else... Martin Armstrong

Tue, 08/16/2011 - 09:11 | 1564888 lizzy36
lizzy36's picture

We will eventually see war. And everyone will blame everybody else.

Tue, 08/16/2011 - 09:59 | 1565040 ElvisDog
ElvisDog's picture

The difference today is that Europe is not ready for war. Before WWI, every country was massively increasing their military. Germany and France had the ability to call up more than 1 million fully trained, fully equiped reservists in two weeks. Same story leading up to WWII - the countries had massive militaries ready to go. Completely different story these days where Europe in the guise of NATO couldn't sustain a conflict against Libya for more than a couple of weeks. There may be war in Europe someday, but it won't be a surprise becase rearmanent will take place for a long time before they're ready to go.

Tue, 08/16/2011 - 08:54 | 1564830 Cdad
Cdad's picture

Down goes the moron driven rally of yesterday...in oil.  Flush go the options junkies, yesterday getting their fix, pounding down delta hedges like they were glasses of water.

Here....soon will come an opportunity...a real one.  But not now...no...as the junkies first need to take their methadone.  

Tue, 08/16/2011 - 08:59 | 1564846 Cdad
Cdad's picture

Up pop the Apple junkies...trying to turn and rally that old dog again to save the NASDAQ.  For 100's of days, they have gone back to this well again and again and again.  Great plan!  Buy the most over owned equity in the history of markets.

Expect a miracle print here...one that has nothing to due with iPhones or valuation or forward earnings...but rather the perpetual attempt by terminators to hide the carnage in the tech group.  It is going to become a fabulous short candidate.

Tue, 08/16/2011 - 09:33 | 1564917 TruthInSunshine
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In the most epic equity POPS! in modern times, NASDAQ leads the way. Always.

The Facebook your RIP off bust (I know, I know...Facebook isn't publicly traded or traded on NASDAQ, but it would have been, and it would have and will gotten/get crushed) will be glorious.

Tue, 08/16/2011 - 11:25 | 1565379 Dick Fitz
Dick Fitz's picture

Cdad- what is your avatar icon? I can't make it out.

The market is too hopped up on pills and dope to function properly. The withdrawal crash is going to be epic...and perhaps fatal.

Tue, 08/16/2011 - 09:18 | 1564856 Sudden Debt
Sudden Debt's picture

what to do...

If Merkel doesn't agree... her future job for the German banking cartel may be a no go... or even worse... her carreer in the Europarlement when she retires migh come in jeopardy! IMANGINE!!! 25K A MONTH FOR DOING NOTHING! GONE! Can't have that right?

if she agrees, only the other Germ's would get stiffed.

Her own interests... the Germ's interests.... her own interests.. her own interests. her own interests...


Tue, 08/16/2011 - 09:10 | 1564883 lolmao500
lolmao500's picture

If euro bonds get life... all the money that is in the US could very well end up in euroland... and then, bye bye US dollar.

Tue, 08/16/2011 - 09:10 | 1564886 swissaustrian
swissaustrian's picture

Germans don´t question their government. They like to be subjected.

Mutti is going to convert her party making some fancy promises. She won´t be reelected anyway.

SPD´s Peer Steinbrück (Bilderberger...) will be her successor.

Tue, 08/16/2011 - 09:11 | 1564889 mantrid
mantrid's picture

As a reminder eurobonds are the last option

There's still that huge Bond Vacuum Tube Made In China eager to buy crap so it can "sustain" its imbalanced export. They've been buying US crap for years, now it's time for UE bonds too. Eurobonds are just a means to keep costs lower.

Tue, 08/16/2011 - 10:34 | 1565144 markar
markar's picture

WW3 is already going on in EU. It's the ratings agencies allied with Wall St. & The City against the sovereigns. knocking them off 1 by 1 while sucking out the assets for pennies on the dollar. A 21st century war-- waged with derivatives instead of bullets & bombs.

Tue, 08/16/2011 - 11:28 | 1565396 Dick Fitz
Dick Fitz's picture

Markar, that's one of the most astute- and scary- observations I've seen on this crisis.I fear more people will die in this war than in the rest combined.

Thanks, now I have to change my shorts.

Tue, 08/16/2011 - 11:38 | 1565470 greek 83
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The interests of German(and European) people are irrelevant

The interests of German banking cartel are relevant

The interests of German industries are relevant

German Lebensraum is more than relevant

Action will be based upon servicing the above interests

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