Germany Doesn’t Exclude Euro Bonds as Last Resort, Welt Says

The German government is no longer ruling out using jointly sold bonds as a last resort to protect the euro area against an imminent breakup, Welt am Sonntag reported, citing unidentified people in the government.

Germany, with its current funding structure, would have to pay an additional interest charge of 2.3 percentage points, the German newspaper reported, citing calculations from Kai Carstensen of the Ifo Institute in Munich. With a gross debt level of 2.1 trillion euros ($3 trillion), that translates to additional costs of 47 billion euros a year, Welt am Sonntag said, citing Carstensen. Forty-seven billion euros are equivalent to about 15 percent of 2012 government expenses, the newspaper said.

Carstensen said that eurobonds would calm markets in the short term but would drive interest rates higher in Germany in the medium term, according to Welt am Sonntag.

A decision on eurobonds won’t be reached in coming days, the newspaper said, citing unidentified members of the government. It is unclear in the government whether Chancellor Angela Merkel’s Free Democratic Party coalition partner would agree with this step, it said.

Martin Kotthaus, a spokesman for the German Finance Ministry, declined to comment on the Welt am Sonntag report.

German Finance Minister Wolfgang Schaeuble said in an interview with German magazine Der Spiegel that he opposed unlimited rescue aid. He rejected eurobonds, saying that as long as members of the euro zone had their own financial policies, there were incentives and possibilities of sanctions to ensure fiscal solidity, Spiegel said.

“There is no collectivization of debt or unlimited support,” Schaeuble told the German magazine. “There are certain support mechanisms that we develop under strict conditions,” it cited him as saying.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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