Eurozone debt sharing: Will Germany soften its position?

Chancellor Angela Merkel’s government agreed to underwrite the debt of Germany’s states but according to FinMin. Wolfgang Schäuble it doesn’t mean Germany is ready to assume similar liability for the Eurozone.

Would you say that Germany will keep on resisting some form of a debt sharing in the Eurozone or not, and why?


Fabian Zuleeg, Chief Economist, European Policy Centre

I think Germany will resist any collateralisation of debt which is open-ended and which is not accompanied by further integration, economically and politically, to ensure that countries have to follow strict rules in future. Simply accepting the liabilities of all countries would be unconstitutional and also political suicide. But I do think we are seeing some softening of the German position, suggesting that they might be willing to consider a compromise solution such as the debt redemption fund which offers a partial collateralisation. There is also a significant divergence of the official German position and what is happening already – the current crisis has shown that, given Eurozone interdependence, it is an illusion to think that a country can effectively stand alone, so the rescue mechanisms and the (necessary) actions of the ECB have already transferred significant risk from crisis countries to countries such as Germany.

Eric de KeuleneerEconomics Professor, Solvay Business School

Yes, I think they will. Financially, they seem to think it represents enormous risks, at least as long as economic policies remain so diverging,
and so profligate in Mediterranean countries. They do not see why Germans have to work 40 hours a week until 67, to pay for the French to work 35 hours a week and retire at 60.

Moreover, it has also become a matter of political credibility; they have said they would accept it only with deeper integration, and will not capitulate.

Some monetization of debt might be more acceptable for Germany, or another extended role for the ECB, if it can be made to be strictly limited, but they do not like it either.


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