German SPD Adviser Says Joint Euro Debt Inevitable After Crisis

German Social Democratic candidate for chancellor Peer Steinbrueck’s top economic policy adviser said there’s no way around introducing some form of joint European debt liability to resolve the euro-area crisis.

Jointly issued euro-region debt is a possibility, while pooling sovereign debt into a redemption fund is inevitable, Christiane Krajewski, a former finance minister for the city-state of Berlin whom Steinbrueck appointed his chief economic policy maker last month, told reporters today.

“Sooner or later one won’t be able to avoid some form of a legacy-debt redemption fund,” Krajewski said at SPD headquarters in Berlin. Asked about so-called euro bonds, she said “it depends on how it’s structured, but I wouldn’t rule it out.”

Chancellor Angela Merkel’s government has repeatedly rejected joint debt liability, saying that such a measure would curtail the incentive for governments to scale back debt. Polls suggest voters agree with that stance going into Sept. 22 elections, with a Forsa survey published today showing Merkel’s lead over the SPD consolidating.

The SPD adviser lambasted Merkel’s recipe for debt consolidation to address the euro area’s woes, repeating the party’s preference to accompany austerity with stimulus.

“Growth impulses are more necessary than ever, because we’re seeing that these economies are to some extent collapsing because of these savings policies,” Krajewski said.

The Steinbrueck aide also dismissed German Finance Minister Wolfgang Schaeuble’s urging of the Greek public to steer away from a debate on a further debt writedown.

“I’m not saying that I’m calling for a debt writedown, but I’m of the view that one should start thinking about what happens after Sept. 22,” Krajewski said.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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