Belfast Telegraph

Catch-22 for Merkel over eurobonds ultimatum

By Tony Paterson

The german Chancellor Angela Merkel faced dire political warnings from her liberal Free Democrat coalition partners yesterday that a German pledge of support for eurobonds at today's euro crisis summit in Paris would risk bringing down her government.

The stark alternative was spelled out by the liberals as the German Chancellor simultaneously faced mounting global and European pressure to drop her country's opposition to eurobonds as they were considered the “only way out of” the euro crisis

Despite several reports to the contrary, Ms Merkel is still officially opposed to eurobonds. She has decided to make today's meeting with President Nicolas Sarkozy her first official duty since returning from holiday in Italy and has doggedly refused to comment on the issue.

But the Chancellor's Free Democrat coalition partners yesterday threatened to end their coalition government with the conservative Christian Democrats if Ms Merkel agreed to eurobonds in Paris. Oliver Luksik, the liberals' European expert, insisted eurobonds would be “fundamentally wrong” for Germany and warned his party would “have to ask whether the coalition still had a future” if the Chancellor signed up to the idea.

A German government spokesman attempted to play down the importance of today's Paris summit and insisted there were “no indications” that eurobonds would be discussed at the meeting. “We don't think they are the right solution,” the spokesman said.

But outside Germany government ministers and financial experts appeared to be queueing up to support the euro bond.

After weeks of euro-inspired turmoil, yesterday's markets opened calmly with modest gains across the Continent. At today's meeting Ms Merkel is expected to come under intense pressure from President Sarkozy to drop German opposition to the euro bond, not least because of France's own deepening financial predicament.

Belfast Telegraph