Investors shouldn’t expect a “big bang” when Chancellor Angela Merkel and President Nicolas Sarkozy meet in Paris tomorrow to discuss the euro-area debt crisis, Merkel’s chief spokesman said.
Joint euro bonds, which “haven’t been an issue” for Germany in the past and are still “not the right” solution now, will not be a topic for discussion in Paris, Steffen Seibert told reporters in Berlin today. He compared the expectations for the meeting to those before a July 21 summit of European leaders.
Merkel warned then that people were “expecting a big bang that will clear the whole sky over Europe and make all the problems disappear,” Seibert said. “Such a big bag didn’t take place on July 21. Instead, important steps emerged, the effects of which will unfold. You shouldn’t expect such a big bag from the meeting tomorrow either. It is and remains a process.”
The leaders of Europe’s biggest and second-biggest economies will meet as investors question whether the July 21 decision is enough to stem the debt crisis that started in Greece. Parliaments are meanwhile preparing to vote on a second Greek aid package, plus plans to empower the 440 billion-euro ($629 billion) European Financial Stability Facility to buy bonds in the secondary market, grant precautionary credits and recapitalize banks by the end of September.
‘Pressure to Save’
Peter Altmaier, the deputy parliamentary leader of Merkel’s Christian Democratic Union, suggested that the government’s resistance to joint bonds may be weakening, saying that euro bonds were not an appropriate solution “for now.”
Euro bonds would “take away the pressure to save among the affected countries,” Altmaier said in an interview on Deutschlandfunk radio today. At the same time, with “concrete problems” to be solved, “it doesn’t make sense to go around with principles and absolutist positions,” he said.
“In this whole debate, nobody knew at the beginning how these events would proceed, so we’ve been careful about making categorical decisions on a permanent basis but rather talk about the foreseeable future,” Altmaier said. “For that reason we’re saying that euro bonds are not the right solution for now.”
Asked repeatedly about Altmaier’s comments, Seibert said that euro-area governments must work toward closer harmonization in interest rates for sovereign debt by stepping up budget consolidation measures rather than jointly issuing common bonds.
“It’s desirable that the interest rates on bonds of the various euro states move closer together in the midterm, but the way to get to closer interest rates can only be through the efforts of the countries affected,” Seibert said.
Merkel, who spoke to Prime Minister Silvio Berlusconi on Aug. 13, “greatly welcomes” the latest round of Italian budget cuts and sees that kind of approach as “the right way” to ultimately bolster the euro, Seibert said. There is still “some way to go” to a more solid euro area, he said.