July 21 (Bloomberg) -- Germany may not resist joining common euro bonds in the euro currency zone “forever” if such a move is needed to support political and fiscal integration, Deputy Foreign Minister Werner Hoyer said.
As euro-region leaders meet today to find a way to stop a debt crisis that is threatening to splinter the monetary union, Germany’s help is bound by constitutional and European Union rules blocking euro bonds, Free Democrat Hoyer said in a telephone interview late yesterday. Chancellor Angela Merkel’s government is ready to back “creative solutions” to protect the euro, he said.
“If we further develop the European Union towards a political union, then the question of liability via euro bonds is an option,” Hoyer said. While euro bonds are “obviously not” on the cards at today’s meeting, Germany will demonstrate how it’s “fully committed” to solving the crisis, he said.
Hoyer in April was among the first European officials to signal that a Greek debt restructuring “would not be a disaster,” after a 110 billion-euro ($158 billion) bailout failed to stop the southern European country’s fiscal crisis.
Hoyer, the government minister responsible for European affairs, served as deputy foreign minister from 1994 to 1998 in the last government of Chancellor Helmut Kohl and has held the post again since 2009 under Merkel.
Merkel and French President Nicolas Sarkozy, meeting in Berlin last night, forged a “common position” to bring to today’s summit and “listened” to the “arguments” of European Central Bank President Jean-Claude Trichet, Merkel’s press office said in an e-mailed statement. Greek Prime Minister George Papandreou said this week Europe may face a “make-or-break moment.”
Trichet’s opposition to a Greek default “may not fully cover the options which we together have,” said Hoyer, whose comments were made before last night’s Franco-German meeting. He was not more specific.
Germany is the “biggest beneficiary” in the euro area of the debt crisis, gaining or saving a total of 20 billion euros over 18 months by paying lower interest rates on sovereign bonds, Folker Hellmeyer, chief economist at Bremer Landesbank said on ARD Television today.
Hoyer advised “caution” over a proposal to expand the European Financial Stability Facility to provide precautionary credit lines to states, citing the risk of “putting into doubt the economic solidity of a couple of other European countries” besides Greece. Unidentified officials in Brussels said that proposal may be discussed today.
Italian bonds rose today, pushing the yield on the country’s 10-year debt down 17 basis points to to 5.43 percent. Spanish 10-year yields fell 15 basis points to 5.83 percent. The yields on both securities surged to records on July 18.
Merkel can count on her Free Democrat allies to support a potential summit accord, said Hoyer. The FDP is “solidly pro-integrationist, pro-European,” he said. “And we’re not going to change that, definitely not.”
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