Raising fresh funds for growth by issuing more debt in the shape of eurobonds will not solve and only exacerbate the bloc's problems, German Chancellor Angela Merkel said on Thursday. "It makes no sense to want to fix everything with eurobonds or other similar 'solidarity' instruments" which would "only aggravate the crisis," Merkel told an electrical industry conference here.
The euro area's long-running sovereign debt crisis "will not be resolved with a miracle cure but will require a great deal of hard work" in the form of fiscal consolidation and structural reforms, she said. Debt-wracked countries could make a start by "not spending more than they take in revenues," Merkel argued.
France's new President Francois Hollande is spearheading a drive for eurobonds, in effect pooling the debt of eurozone countries, in order to raise fresh debt funding. But Germany is firmly opposed to such a move, arguing it takes away the pressure for reform in spendthrift countries and also undermines market discipline. Berlin says using eurobonds now, before member states seal in stone shared fiscal and economy policy, would only increase the bloc's total debt burden while increasing its own borrowing costs. France and some other eurozone states say that eurobonds could fund desperately needed growth policies after years of austerity have pushed the economy into recession.
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