Thursday, June 28, 2012

Germany and Shared Liability for Eurozone Debt

The German Finance Minister's remarks before today's summit gave encouragement to Eurocrats who see checks being written and more jobs being created for themselves.  I was very surprised to read the headline, until I read this from the Wall Street Journal report itself:

"Mr. Schäuble said Germany could agree to some form of debt mutualization as soon as Berlin is convinced that the path toward establishing centralized European controls over national fiscal policy is irreversible. That (?) could happen before full implementation of treaty changes."

There is very much less here than hit the headlines, in my opinion.  I don't believe that Spain, France, or Italy among many others are ready for any form of European control over their national fiscal policies.  This statement by Schauble is a clever way of throwing things right back into the court of Hollande and the other Eurocommunards.  If you want Germany to agree to some form of debt mutualization--probably not the one you're thinking about--then give up national sovereignty over fiscal policy. 

If the Spanish government is too proud to accept a European bailout and too arrogant to accept aid to its banking sector through European regulatory intermediation, how could they accept this kind of scenario? 

No, I don't believe that much at all has been conceded by Chancellor Merkel, her own words nothwithstanding.  I don't read "concession" into the German Finance Minister's remarks. There is still a long way to go.

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