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Merkel pours cold water on common debt plan

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Sceptical: Angela Merkel is opposed to the proposals. Photo: Michel Kappeler/Pool via REUTERS

Sceptical: Angela Merkel is opposed to the proposals. Photo: Michel Kappeler/Pool via REUTERS

via REUTERS

Sceptical: Angela Merkel is opposed to the proposals. Photo: Michel Kappeler/Pool via REUTERS

German Chancellor Angela Merkel has poured cold water on a push by nine EU member states, including Ireland, for a European borrowing structure to fund the costs of reviving the economy after the Covid-19 outbreak.

The influential German leader's opposition to common bond issuance is unchanged, according to her chief-of-staff Helge Braun.

Germany's government is "sceptical towards anything that endangers the stability of the eurozone economic and currency area", Mr Braun, the head of the Federal Chancellery, told the 'Frankfurter Allgemeine Zeitung' newspaper yesterday.

The common bonds would ensure weaker countries can continue to borrow if the markets become more challenging but Germany, along with the Netherlands and Austria, fears the scheme could undermine their own financial stability by putting their taxpayers on the hook for other governments' spending.

On March 25, Ireland joined eight other eurozone members in signing a joint letter backing the scheme, an idea that was initially raised but rejected after the last financial crisis.

"We need to work on a common debt instrument issued by a European institution to raise funds on the market on the same basis and to the benefits of all member states, thus ensuring stable long-term financing for the policies required to counter the damages caused by this pandemic," the letter said.

It was signed by the leaders of Belgium, France, Italy, Luxembourg, Spain, Portugal, Greece and Slovenia, as well as Ireland.

Yesterday, Spanish Prime Minister Pedro Sanchez set out the case for such bonds in an article that was published in newspapers in Germany as well as in Spain and Italy.

"It is time to act with solidarity: creating a new debt mutualisation mechanism," Mr Sanchez wrote in an op-ed for several newspapers, including Italy's 'La Repubblica' and Germany's 'Frankfurter Allgemeine Zeitung'.

"This is a time for breaking old national dogma," he said ahead of an EU finance ministers meeting that is due to take place tomorrow.

Irish Independent