Bonds Away

In Banking World, Call for Euro Bonds Falls on Deaf Ears

Martin Blessing XX
Martin Blessing, the Commerzbank CEO, found little support for his plan to back euro bonds.
  • Why it matters

    Why it matters

    The proposal by Commerzbank CEO Martin Blessing backing eurobonds has reignited — perhaps only briefly — debate in Germany over sharing debt obligations.

  • Facts


    • The CEO of Germany’s No. 2 bank supports creation of eurobonds.
    • The German government and CEO of Deutsche Bank do not.
    • The proposal by Commerzbank’s Martin Blessing has reignited debate on the issue.
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Martin Blessing, chief executive of Germany’s second-largest bank, Commerzbank, is known for his penchant to provoke people. His call in a guest column in Handelsblatt on Wednesday for the introduction of common government bonds among euro zone countries did the trick, reigniting a debate that many thought had long been buried.

Would common euro bonds seal the deal on an economic union for Europe once and for all, or are they merely an easy way out for countries stuck in the euro’s ongoing debt crisis?

That question has been on the minds of European leaders for the last four years, ever since a government debt crisis in Greece, one of the euro zone’s smallest and poorest members, provoked a wave of contagion that spread throughout the currency zone.

Mr. Blessing’s proposal for the partial mutualization of European debt fell with a thud in European capitals. The German government response to Mr. Blessing’s was particularly harsh.

“Instead of dealing with an issue at the worst possible moment, Mr. Blessing should concentrate on his function as chairman of the board,” said Steffen Kampeter, the parliamentary state secretary in the German Finance Ministry.

Chancellor Angela Merkel’s office also gave Mr. Blessing’s proposal short shrift, her spokesman Steffen Seibert saying: “This issue isn’t up for debate for us,” he said.

The German chancellor has said the introduction of eurobonds — which would commit German taxpayers to repay the debts of other euro zone countries — would not happen in her lifetime. But some economists argue that a German commitment would end existential questions surrounding the euro’s future.


euro crisis_revised


There is a sense that the debate over issuing joint bonds in the currency bloc has come and gone. Germany has opposed putting more taxpayer money on the line for other European countries, while France remains unwilling to surrender the kind of fiscal sovereignty that could tip Germany into backing a common debt approach.
”Euro bonds are not on the agenda. We don’t need any such fundamental debates right now,” Pierre Moscovici, France’s former finance minister and a top candidate to become the next European commissioner for monetary affairs in Brussels, told Handelsblatt.

Views in the financial world, which gathered in Frankfurt on Wednesday for an annual Handelsblatt-sponsored conference entitled ”Banking in Crisis,” were more mixed.

“The ECB is not fundamentally against euro bonds,” said Sabine Lautenschläger, a member of the European Central Bank’s executive board. But she added it is also important to keep incentives for governments in place. “National governments must continue to feel the pressure to implement structural reforms.”

Anshu Jain, the co-chief executive of Deutsche Bank, Germany’s largest bank, was more skeptical, arguing that markets had forced national governments that had borrowed too much money to confront their high debt levels over the last four years.

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