Markets blackmailing Germany to help indebted nations - Merkel
Chancellor rejects eurobonds plan as Greece plays hardball over its debts
Published 27/08/2011 | 05:00
GERMAN Chancellor Angela Merkel claims markets are trying to "blackmail" Germany into helping debt-strapped European countries at a political rally yesterday.
She said the move by investors underscored the need for all euro-area governments to reduce their debt.
"After the states bailed out the banks, the financial markets are again trying to blackmail states," Ms Merkel said at a rally of her Christian Democratic Union.
She told the crowd that instead of outside help, "countries needed to get their debt down".
She once again rejected the idea of common euro area bonds. "That's where we have to put up a clear stop sign and say we won't do that," Ms Merkel said.
Spain has already accepted that logic. Its two main political parties agreed to a German and French call for a constitutional "balanced budgets" rule. The specifics of the deal have yet to be worked out.
That comes after the French and German leaders held two-way talks last week where they came up with a list of ideas including the balanced budget.
Ms Merkel's comments come as her government is to vote in favour of a second aid package for Greece and an expansion of the powers of the European Union's crisis fund. She is keen not to be seen as a soft touch after backing that plan.
Meanwhile, Greece is also trying to play hardball with the markets.
Yesterday, Greece sought support for its plan to squeeze part of the cost of its second bailout out of its private-sector lenders.
Greece said it could scrap a debt-swap deal that will see it swap current bonds for debt due to be repaid in 30 years if participation by banks didn't reach 90pc.
Greece stepped up pressure by sending a document to the finance ministries of 57 countries where banks and insurers hold Greek debt.
It wants governments to press their domestic banks to support the swap.
Germany was behind the push for private investors to foot part of the bill for a new aid package for Greece.
The second Greek bailout is also being delayed by Finland's demands that it should receive collateral for its share of the new loans for Greece.
The agreement between Finland and Greece has prompted other nations to demand similar treatment, threatening to delay or scuttle the new aid plan.
(Additional reporting Bloomberg)