Merkel backs plan to put burden on bondholders
Published 09/11/2010 | 05:00
GERMAN Chancellor Angela Merkel's coalition backs proposals for a two-step crisis mechanism to make bondholders pay for any future euro-area crisis, the parliamentary finance spokesman for her party said yesterday.
"We cannot allow ourselves to be forced into any more fly-by-night actions and rescues made with taxpayers' money," Leo Dautzenberg, a Christian Democratic Union lawmaker, said.
"Banks and other investors must be made to contribute in the event of a sovereign default."
Mr Dautzenberg said he "very much supports" plans by German finance minister Wolfgang Schaeuble to extend the maturity period of government bonds for indebted states that are forced to apply austerity measures.
If necessary, that would then be followed by a second step involving "a wholesale restructuring of all outstanding claims," Mr Dautzenberg said.
Ms Merkel's coalition, trailing the opposition in polls before state elections next year, has been ramping up calls for investors to be held accountable to avert any repeat of the debt crisis that spread from Greece.
That message clashes with European Central Bank president Jean-Claude Trichet, who says such talk risks exacerbating the situation for indebted euro-area nations such as Ireland and Greece as they struggle to reduce their budget deficits.
Mr Schaeuble was working up the proposals in time for a meeting in Brussels next week of European finance ministers, a Finance Ministry spokesman said.
Mr Schaeuble wants contracts for euro-region bonds "to spell out in the future exactly what will happen to the demands of the investor in a crisis situation," 'Spiegel' cited him as saying.
The International Monetary Fund (IMF) should manage the process of applying the crisis mechanism, Mr Schaeuble said.
The European Union is due to draft an outline of its permanent debt-crisis procedure by mid-December. The permanent crisis mechanism, which was agreed on in principle by EU leaders last month, will replace the €750bn EU-IMF rescue fund set up in May once its mandate expires in 2013.
"There's no way that we in Germany want an extension of the rescue fund or can sell that to the taxpayer," Frank Schaeffler, a lawmaker with Merkel's Free Democratic Party coalition partner, said yesterday.
"I have serious fears that there is pressure in the euro region to do just that."
Meanwhile, Mr Trichet, speaking on behalf of the world's central bankers, said the US Federal Reserve's decision to buy more assets was driven by a desire to anchor inflation expectations, not to weaken the dollar. (Bloomberg)