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.