George Soros has recommended the way to save Europe and the euro from systemic collapse is Eurobonds. However, German Chancellor Angela Merkel insisted that the euro zone-wide government bonds can’t solve the current crisis, and she can’t see a sign of new recession in Germany. Joined with Merkel, French President Nicolas Sarkozy expressed the same idea.
Of course, with the strongest economies in Europe, France and Germany see no sign of the recession. They may want a rule imposed for the rest of weaker economies in Europe without recognizing the differences of needs and preferences of others.
"Solving the current crisis will not be possible with Eurobonds, and so Eurobonds are not the answer," Merkel said in an interview with ZDF television. And she considered the Eurobonds would lead Europe into the “union of debt, not union of stability.” Merkel even insisted that “every country must attend to reducing its own debt."
Because of interest rates differentials, and different fiscal policy, it would be very hard for weaker economies to reduce their own debt. When all countries are having deficits concurrently with high employment, they are heading towards a downward deflationary spiral. Even if budgetary targets of those countries were met, in the absence of exchange rate depreciation, the adjustment would require reductions in wages and prices, producing deflation.
The Minister of Finance of the Netherlands, Jan Kees de Jager, shared the same view with Merkel and Sarkozy in German weekly Der Spiegel. He noted: “Eurobonds are not the solution… and induce governments to run up more debts instead of saving.”
The news on Merkel's rejection to Eurobonds can be read here.
Of course, with the strongest economies in Europe, France and Germany see no sign of the recession. They may want a rule imposed for the rest of weaker economies in Europe without recognizing the differences of needs and preferences of others.
"Solving the current crisis will not be possible with Eurobonds, and so Eurobonds are not the answer," Merkel said in an interview with ZDF television. And she considered the Eurobonds would lead Europe into the “union of debt, not union of stability.” Merkel even insisted that “every country must attend to reducing its own debt."
Because of interest rates differentials, and different fiscal policy, it would be very hard for weaker economies to reduce their own debt. When all countries are having deficits concurrently with high employment, they are heading towards a downward deflationary spiral. Even if budgetary targets of those countries were met, in the absence of exchange rate depreciation, the adjustment would require reductions in wages and prices, producing deflation.
The Minister of Finance of the Netherlands, Jan Kees de Jager, shared the same view with Merkel and Sarkozy in German weekly Der Spiegel. He noted: “Eurobonds are not the solution… and induce governments to run up more debts instead of saving.”
The news on Merkel's rejection to Eurobonds can be read here.
