Schauble: "There Is Help Up To A Point"... And Who Is Willing To Force A Constitutional Change To Push Eurobonds?

Tyler Durden's picture

Some time ago we predicted that for Germany the calculus on the bailout of Europe is simple: at some point the costs, in the form of contingent liabilities as a % of GDP, from backstopping an insolvent Europe will become simply too high and offset the benefit of keeping the EUR (a currency which more than anything boosts the German export sector courtesy of a peg that equates German "strength" with that of the weakest members of the Eurozone). Granted, should the EFSF be launched in its peak formation at €3.5 trillion, and be coupled with a eurobond, the direct and indirect Europe bailout costs to Germany become simply so high to where they will be politically untenable. Yesterday we also said that we anticipate any talk of support for a Eurobond would be promptly refuted by German government officials. Both of these happened late yesterday, when German Finance Minister told Spiegel that Germany is willing to help out... to a point. And yes, the report by Die Welt which said that the German authorities are actually considering the implementation of a Eurobond, that received so much press and was noted on Zero Hedge, was immediately denied by officials. Here is Goldman's Dirk Schumacher with a complete summary of the rapidly changing events.

Finance minister Schäuble: There is help up to a point. Demands for an introduction of Euro Bonds by Italian finance minister Tremonti over the weekend were again rejected by finance minister Schäuble who said in an interview with Spiegel news magazine that: "there will be no collectivization of debt and help will be provided only up to a point." When asked whether financial help would be stopped when countries did not comply with the consolidation and reform course, the finance minister said that there won't be helped "at any cost".


Economics minister Rösler also rejected the idea of a common bond in Handelsblatt newspaper, as this would imply higher interest rates for Germany at the expense of German taxpayers.


SPD chairman Gabriel at the same time said that he would, under certain conditions, favour the introduction of a Euro Bond, though only for part of the government debt of "50% to 60%". Gabriel also said that there should be still interest rate differentials also for those countries using a Euro Bond and those countries would also need to pass control of their budget to Brussels.


Finally, Welt am Sonntag newspaper cites government sources according to which some kind of common bond might be needed as a last resort against the crisis. This, however, was immediately rejected by a spokes person of the finance ministry.


Note, that an introduction of a Euro Bond would make it necessary to change the constitution of several countries including Germany and would require at the least a further change of the institutional set up of the Euro-zone with more oversight and control from Brussels.

And in a Europe driven by reactionary strikes and in which the majority opinion in virtually every country is now against a coordinated bailout, we are eagerly looking forward to see which regime will conduct mass career suicide by passing such a massively unpopular move in order to preserve PIIGS entitlements, as it will naturally be spun by an increasingly belligerent media.

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Cassandra Syndrome's picture

Schaublefreude bitchez

magpie's picture

Bankster Angst and Weltschmerz, bitchez

wandstrasse's picture

Schäuble is just fishing a few votes by uttering some falcon talk. Eventually they will kick the can until the very end... as the population wants it, btw. I stopped bashing our leaders long ago. The population has been voting for this catastrophic debt-wealth since decades. Politicians just took these orders. Banks and plutocrats are the biggest profiteuers of this mess, but not the cause.

Josephine29's picture

The Eurobond plan actually has quite a few flaws in it. In terms of implementation a big one is highlighted below.

Exactly how would this be enforced?


If a country failed to follow the rules and overspent and borrowed then what could be done? If you expel them from the deal then their debt costs would rise for which you are jointly responsible. You cannot take control as the idea of say Germany taking control over Greece has obvious historical precedents and issues.


It is a bit like the UK football premiership which starts season after season with talk and promises of some version of respect for referees. From what I watched this weekend this season’s effort has already failed with players snarling at and abusing officials.

So we have yet another paper tiger from Europe...


Jack Sheet's picture

Eurobonds may be introduced or not, but they cannot  succeed because the interest rate that would suppress inflation in Germany  (let's say 5-6% on 10 year bonds) would perpetuate the bankruptcy of the PIIGS. As Felix Zulauf said last year, either Germany must reflate or the PIIGS must deflate. If the EUR is forced to stay intact,which is what the power elites in Brussels and Frankfurt want at all costs, the solution will have to be the printing press to devalue PIIGS debt while crucifying German savers.


Crisismode's picture

Well, the Bernank will simply click a few keys on his laptop and,



There's your 3.5 Trillion, my very good European friends!


Byte Me's picture

Nice article to start the day.

Let them eat cack.

Gordon Freeman's picture

Serious question:

From a MACRO POV, how would the burden of German re-unification compare to the current mess for Germany?

I ask because they had no problem saddling themselves with the former (whose costs were Gargantuan), and thus might belie the common view that they will balk at the current EZ solutions being debated...

Byte Me's picture

Off the top of my head -- the re-unification was sold to the German populace by Herr Kohl on the understanding that it would cost DEM20bil (say €10bil).

It would be paid for via a surcharge on income tax for a few years. Naturally, the stoic German sheeple are still paying this to date, and the truer cost of re-crucifixion was closer to DEM200bil.

The effects of Nieuwe Einige Deutchland à la Kohl also drove up the cost of borrowing across the continent and exacerbated the 1990-91 recession.

So clearly -- backstopping all their Peripheral Serf-States is far from palateable for dear old Deutchland because there's no mercantilist profit to be seen. How fucking sad. They (and France) knew exactly what they were getting into with currency union -- hell, they'd had enough experience with The Snake and the Ecu. They just didn't want to do due diligence upon themselves or the peripheral shitbags that they allowed to join.

So. It'll cost PLENTY. Germany can't pay that much

Let them eat cack.

Gunther's picture

The official cost for eastern Germany over 20 years is around a trillion euro.

If used-up chancellor Kohl said it would be 20 billion keep in mind that that guy had no understanding of economics what so ever and did never take advice.


There are calculations around that the euro COSTS Germany ~10% of GDP a year.

The guy arguing that was boss of a big German steel corp for a long time.

(mostly German)

So, guaranteeing the current mess and subsidizing EU interest rates gets way more expensive then the GDR.

jubispupper's picture


New member here.  I truly enjoy your posts and find your manner of analysis and commentary lucid and enjoyable to read.  Great post here.

I would think that German taxpayers and thus their leaders would never allow their Nation and economic prosperity to be melded into greater Europe, even if Eurobonds were issued at 50% of par and there were financial penalties for Euro member Nations that failed to comply with required austerity measures.

I predict that German citizens will ultimately get to redeem some of their Euro holdings for new Deutsche marks, and Germany withdraws from the Euro zone.  I get the currency peg benefit for their manufacturing sector, but I suspect the total economic liabilities of all Euro-zone members sans Germany is way understated -- not unlike the Goldman Sachs fraud used to qualify for example Greece for EZ membership in the first pace.

The difference in culture among EZ Nations was just too great for this Euro experiment to ever work out long term.  Take Greece, which apparently has riots over "austerity measures" and its citizens generally cheat on their taxes ... how can a German taxpayer link Greek debt to German credit?

There could very well be a war between EZ members before this is all done!  

Construct's picture

Germany lend PIIGS money.

PIIGS cannot pay back.

Germany give PIIGS money to pay back it's debt?

Enough with the god damn economic torture of Scandinavian countries anymore. It is NOT written in the stars that we owe these apes in other countries anything.

YHC-FTSE's picture

Eurozone Bonds? That would be nobody. The meeting in Paris between Merkel and Sarkozy have fizzled out apparently. So, more pain ahead, but a counterbalance news popped up on the radar making the CHF drop: The rumour is stronger than ever that CHF will peg to the Euro. Could be another case of talking down the currency to help Swiss exports, but as I posted earlier in the week, it does make sense for the Swiss to peg to the Euro for long term gains in their industries.

Meanwhile, US housing data is due today. Looking at the 0.2% cut for Lowe's - the home improvement depot, it probably hasn't changed much since the last time. Maybe a little bit worse, maybe a little bit better from atrocious.

Fuh Querada's picture

Talk is cheap. We have seen this posturing before (Ireland). In the end the Germans will cave in to the banks and the power elite, the QE to infinity machine will go into overdrive ("Draghi racing").

Reptil's picture

They'll try though; I expect, like before they'll draw up some overcomplicated, halfhearted treaty with 40% left (open) to chance, and then push Andrea and Rutte into that with a few skilled hand-gestures (not the Jedi type, more like the other team) in a hastily organised meeting, while dark clouds of imagined chaos loom overhead.
Then after the fact the population will be informed, with a nice marketing campaign, and a barrage of flowery feel good messages on the idiot box. At first no one will feel it (courtesy of extended liquidity of the banks), labradors will play outside in the garden, infants will smile for no reason at all, and the sky will be blue.

Of course, as all of you know, in a year or so, the pain will come. And then, inevitably, cuts and layoffs in everything, an export and/or real estate collapse (since none of this is going to work, ever), followed by more propagandistic manure and... riots. By then the populace will not remember summer 2011, just like americans have a blind spot for anything that happened in 2007-2008, and just like the british are too confused and outraged over (im)proper use of Blackberries, to even notice the veined smelly City® rod up their collective arses.

At least, that is the plan.

For Papandreou it worked since he at least looked like a dependable family man, Silvio's got some work ahead of him..

wandstrasse's picture

I said it already earlier - Germany is in the worst position of all, because it is the last citadel of industrial production worth mentioning in the western world. This means, there is still a lot of collateral to create debt. And believe me, this debt WILL be created, and because this debt will default as any debt does, the German 'collateral' goes to.... the winner is....

Construct's picture

Well you are correct. Germany is the only and last 'good' country in Europe. If they destroy its industrial base and get crushed under to much debt it is over for Europe.


I mean just look at UK. What in gods name happened to the west? it is down right embarrassing that their police are armed with sticks facing armies of third world garbage that we imported to live off of our welfare systems. I am willing to go as far to say that we now have become the third world.

Fuh Querada's picture

Switzterland ? Norway will probably be taken out after Iran.

Fuh Querada's picture

@ ws:

The winner is..

China, plus Russia when oil goes over 150$, and when they have a stranglehold on German natgas supplies after nucelar power has been abandoned.

kaiten's picture

The reality is that eurobond is only a question of time. Germans were also against bailouts, remember? The battle now is about form, not essence. Oh, and if you have eurobond, you dont need EFSF, I dont get why you mix in the both.

misterc's picture


it might be time to correct the ZH view of Germany as an economic stronghold. Where does this myth stem from?

Random facts:

-child poverty rate of 16% (well above OECD average 12%)

-3 million unemployed + (!!!) at least 5 million on minimum welfare a.k.a. "Hartz IV" (these are often forgotten)

-the absolute number of "Hartz IV"-recipients is not being published anymore, just the number of households receiving it. To me, that's a real stunner.

-we have a debt to GDP approaching 90% in fast steps, we have unfunded liabilities too big to estimate on a standard handheld calculator.

Please correct this bogus about stronghold Germany. It's just not true.



magpie's picture

And who really wants to know how many of the employed are requiring the welfare extras, not only Aufstocker but Kurzarbeit subsidies.

wandstrasse's picture

...the employment situation is presented fine in the media, however it mainly bases on Zeitarbeit bodyleasing = same work, half income (the half of a little in most cases) plus being fired on a minute's notice.

RealFinney's picture

one should never believe anything until it's been officially denied.

-Sir Humphrey Appleby.

Jessica6's picture

Ironically the original quote came from the founder of modern Germany, Otto Von Bismarck:

- Never believe anything in politics until it has been officially denied.

sabra1's picture

since these globalist bastards reside in europe, tha euro isn't dropping, bring in the swiss franc at par, then a new gold/euro currency. now it all makes sense!

TK7936's picture

"rule out eurobonds for as long as member states conduct their own financial policies and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity"

The Key here is "as long" he is already softening his position.

whirlybird rules's picture

As the news worsens, the euro gets stronger...  is an orderly decline of the euro even possible at this point?    Let's say the new "orderly" is less than 5 cents a day (?!)


gwar5's picture

If Germany still had a big army they'd be happy to bail out Europe and enforce the terms.


shortus cynicus's picture

Germany has no constitution. It's has only temporary low enforced to organize country until soviets goes home and reuniting occurs.

That have occurred but corrupt elites are denying the right for establishing rightful constitution by the people.

So what Germany needs is not "changing of constitution" but enacting one !!!

magpie's picture

It's called the "Basic Law". Much has been said about hidden clauses etc.

Even if it would still matter, EU law & courts trump German jurisdiction today.

oogs66's picture

No way a Eurobond gets done any time soon

theprofromdover's picture

Since germany has a worsening energy crisis, has entirely filled the plains with wind turbines, and is now too scared to go for the forever-filthy nuclear power plants, maybe the deal is Germany gets to place a whole load of nuclear power stations in the southern states, in exchange for the bail-out; all power generated for the exclusive use of Deutchland.

Don't be surprised, politicians around the world would sell their souls (and yours too) for a cop-out deal.

theprofromdover's picture

... and all clean-up and final de-commissioning costs are the host's responsibility.

RiskAverseAlertBlog's picture

In diplomatic speak I'm reading "hopelessly insolvent." Game over.

janus's picture

Somebody help janus:

did spd chairman gabriel's definition of this quasi-eruo bond sound more like a bundled security than a bond?  i'm no spd chairman, but it seems that a bond representing 'only' 50-60% of the debt of a region which will be aggregated (what kind of debt?) from among a dozen or more 'nations' and alloyed into an indivisible instrument, while at the same time the elements that are in this thing bound are not at all bound together in policy, charecter or purpose...yup, the more i think about it, the more this is just like a bundled mortgage security...that worked well. 

and then there's the sinister side to this: consider, of course, what happens when 50-60% will no longer suffice, and the inevitable concession to 138% is demanded of a people so thrifty they make the scots look like spendthrifts.