The Star Malaysia - StarBiz
Debt sharing rejected
Merkel hardens opposition to Germany-backed euro bonds
German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe’s leaders for not doing enough to arrest the financial crisis.
BERLIN: German Chancellor Angela Merkel hardened her opposition to joint debt sharing in the euro region as President Barack Obama singled out Europe’s leaders for not doing enough to arrest the financial crisis.
With Europe’s debt crisis cited last week for cancelled initial public offerings, weaker-than-expected Chinese manufacturing figures and a rise in the US jobless rate, Merkel rejected joint debt issuance in the 17-nation euro area as a solution, saying “under no circumstances” would she agree to Germany-backed euro bonds.
Now, some “come along and ask for euro bonds, saying all we need are equal interest rates and everything will turn out all right,” Merkel said in a speech to members of her Christian Democratic Union in Berlin on Saturday. Instead, what’s needed was an economic overhaul to tackle the lack of competitiveness in Europe, she said.
Merkel, the head of Europe’s biggest economy and the largest contributor to bailouts for Greece, Portugal and Ireland, is the pivotal player in efforts to resolve the crisis now in its third year. As Spain struggles to avoid becoming the next country to call for a rescue and the euro slides near a two-year low against the dollar, Obama added to pressure from the European Central Bank, France and Italy to do more to halt the spread of contagion.
Obama, speaking at a Chicago fundraiser on June 1 as he bids for reelection in November, said that a report showing the slowest month of US employment growth in a year was in large part “attributable to Europe and the cloud that’s coming over from the Atlantic.” The “whole world economy has been weakened by it,” he said.
“Europe is having a significant crisis in part because they haven’t taken as many of the decisive steps as were needed to deal with the challenge,” he said at a separate event in Minneapolis.
The president’s point person for the European crisis, Lael Brainard, Treasury undersecretary for international affairs, ended a three-day tour of Europe’s crisis capitals the same day as work continued on erecting a financial firewall to stem contagion. The European Union was targeting July 9 as the start date for its permanent rescue fund, the 500 billioneuro (US$620bil) European Stability Mechanism, an European Union official said.
Brainard held closed-door meetings with government officials in Athens, Madrid, Paris, Frankfurt and Berlin in a week when investors flocked to the perceived safety of German and US bonds. The euro fell against the dollar and dropped to an 11-year low against the yen as uncertainty over the outcome of Greek elections on June 17 shifted to take in Spain, where Prime Minister Mariano Rajoy’s government is struggling to shore up banks amid a recession.
Merkel and Finance Minister Wolfgang Schaeuble were urging Rajoy to take an international bailout since Spain could not solve its banking woes alone, German news magazine Der Spiegel reported on Saturday in an advance copy of an article in this week’s edition, without citing a source for the information.
Spain “will emerge from the storm under its own efforts and with the support of our European partners,” Rajoy said in a speech on Saturday in Sitges, near Barcelona, calling on analysts and investors to moderate “irrational” views of Spain’s financial situation. “We are not on the edge of a precipice.” — Bloomberg