German government no longer rules out euro bonds

The German government no longer rules out agreeing to the issuance of eurozone bonds as a measure of last resort to save the single currency, conservative newspaper Welt am Sonntag reported on Sunday.
Even though Finance Minister Wolfgang Schaeuble and Economy Minister Philipp Roesler again spoke out against eurozone bonds and debt collectivisation, Welt am Sonntag reported the German government is nevertheless considering that and other measures.
"Preserving the eurozone with all its members has absolute top priority for us," according to a government source quoted in the newspaper under the headline: "Government no longer excludes European transfer union and joint euro bonds as last resort".
The newspaper, traditionally close to Chancellor Angela Merkel's Christian Democrats (CDU), indirectly quoted the source adding: "In case of emergency, one would thus even be prepared to accept the introduction of a 'transfer union' and at the end of the day even joint eurozone bonds.
"Without these euro bonds, it might no longer be possible to save the eurozone," the newspaper continued, further quoting the source indirectly. "The path we've taken so far with multi-billion rescue packages for financially struggling states is beginning to reach its limits."
A government spokesman in Berlin declined to comment on the report in Welt am Sonntag but instead pointed to the Schaeuble interview in Der Spiegel news magazine published on Sunday.
Schaeuble said Germany remains against any collectivisation of eurozone governments' debt and creating common euro bonds is impossible while countries run separate economic policy.
"It still stands: there will be no collectivisation of debt and there will be no unlimited support," he said. "There are certain support mechanisms that we are developing further - with strict conditions." "The member states that need our solidarity must reduce their deficits and reform their economies - with at times very tough measures," he said.
Der Spiegel said Schaeuble also ruled out the issuance of eurobonds unless certain hurdles are removed. "I rule out Eurobonds for as long as member states conduct their own financial policies and we need differing interest rates so that there are possibilities of incentives and sanctions to force fiscal solidity," he said.
Economy Minister Roesler also spoke out against eurozone bonds in an interview in Handelsblatt newspaper on Monday: "I consider euro bonds to be the wrong approach in a Europe in which every member state should take responsibility for itself." Pressure is nevertheless growing on eurozone leaders to take a more radical approach to the eurozone's debt crisis ahead of a potentially vital meeting of German Chancellor Angela Merkel and French President Nicolas Sarkozy next week.
Italian Economy Minister Giulio Tremonti renewed his call for a collective eurozone bond on Saturday. Tremonti returned to proposals for jointly issued bonds that would effectively make individual governments' debt a common burden, saying they were the "master solution" to the eurozone debt crisis. "We would not have arrived where we are if we had had the euro bond," he said on Saturday.
The comments underline the sharp divisions hampering efforts to co-ordinate a response to the eurozone debt crisis, which escalated dramatically last month as markets turned their fire on Italy, one of the bloc's most heavily indebted countries.
What is at stake was highlighted by a new poll for the Bild am Sonntag newspaper on Saturday which showed 31 percent of Germans believe the euro will be gone by 2021. The idea of euro bonds was also dismissed by Deutsche Bank chief economist Thomas Mayer. He told Deutschlandfunk radio that and raising the European Financial Stability Fund (EFSF) could lead to the end of the European Monetary Union (EMU).