Aug. 9 (Bloomberg) -- Germany’s main opposition Social Democrats raised pressure on Chancellor Angela Merkel to agree to more burden-sharing to stem the euro crisis, saying she must assume greater risks to avert a breakup of the single currency.
Merkel, while rejecting joint euro-region bond sales, fails to say that Germany is already exposed to losses from the debt crisis through the European Central Bank’s bond purchases, SPD floor leader Frank-Walter Steinmeier said in an interview with the Rheinische Post newspaper posted on the SPD website today.
“The government should finally be honest about it to the people,” said Steinmeier, who served as Merkel’s foreign minister in her first-term government and is a candidate to face her at next year’s federal election. “If we want to prevent the breakup of the euro zone, it won’t be without risks for Germany.”
Merkel returns from her summer vacation to the crisis-fighting front line next week after ECB chief Mario Draghi unveiled proposals to help lower borrowing costs in Spain and Italy. The German government backed the plan, under which the ECB would consider buying government bonds only in tandem with Europe’s rescue funds and in return for strict conditions on euro members that request help.
Prime Minister Mario Monti’s Cabinet held “lengthy” discussions on a possible request for the bailout funds to buy Italy’s bonds, Education Minister Francesco Profumo said in an interview today, adding that the government still has “some time to discuss it.” Profumo said that he doesn’t expect Italy to be subject to additional conditions in return for aid.
In Germany, the SPD has adopted a proposal by the council of economic advisers to set up a so-called redemption fund for euro government debt that would be backed by joint and several liability. Members of Merkel’s Christian Democratic Union party including Kurt Lauk, a former European lawmaker who now heads the CDU’s industry wing, have also said that Merkel will have to agree to a debt-sharing arrangement to save the euro.
“The government has so far rejected all proposals for a limited and politically-controlled liability, be it euro bonds or a debt redemption fund, and is secretly agreeing to the interventions by the European Central Bank,” Steinmeier said. “The default risk is the same, but I prefer the democratically legitimized option.”
Steinmeier said that he backs SPD chairman Sigmar Gabriel’s push to introduce shared liability for the euro region’s public debt that’s limited and under democratic control. He said Merkel is hiding the mutualization of debt via the ECB from the public.
“Joint liability has long been happening,” Steinmeier said. If southern euro members default, “our liability is unlimited, without the Bundestag ever having voted on that.” The Bundestag is Germany’s lower house of parliament.
Draghi’s Aug. 2 suggestion that the ECB might reactivate its bond-buying program has provoked mixed responses in Germany. While former ECB Chief Economist Otmar Issing said price stability is “massively threatened,” Georg Streiter, Merkel’s deputy spokesman, said the government backs Draghi since he “clearly addressed the primacy of politics” during the crisis.
“Germany has to pay” should the ECB need a capital increase after spending billions of euros to buy government bonds, said Steinmeier, who was chief of staff under former SPD Chancellor Gerhard Schroeder.
Merkel has signalled she’ll seek a third term at elections due in the fall of 2013 that she has said will be fought on the euro crisis.
Support for Merkel’s CDU/CSU bloc held at 36 percent in a weekly Forsa poll for Stern magazine published yesterday, while her Free Democratic coalition partner was also unchanged at 5 percent. The SPD dropped a percentage point to 26 percent, and its traditional Green Party ally gained a point to 13 percent. Those scores, if replicated at the election, would leave neither camp with a majority.
Saving the euro is “in good hands” with Merkel, according to 70 percent of respondents to a separate Infratest dimap poll for ARD television released Aug. 1. Satisfaction with the chancellor’s work rose 2 percentage points from July to 68 percent, the highest score since December 2009, the poll showed.
At the same time, 56 percent said they were worried about the economy faltering next year, a level not seen since the summer of 2008, ARD said. While 84 percent said the worst of the crisis is still ahead, 76 percent said a breakup of the euro would be bad for Germany and almost two-thirds, 64 percent, said the euro will survive and still be around in several years. Fifty-six percent said the government should “do everything” to save the euro.
Infratest polled 1,004 voters on July 30-31. The results have a margin of error of as much as 3.1 percentage points.
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