Martin Blessing is being criticized by the German government for his controversial suggestions on how to combat the euro crisis. The chief executive of the country’s second-largest bank explained to Handelsblatt’s editor in chief Gabor Steingart why he thinks “euro bonds” make sense.
Handelsblatt: Mr. Blessing, reactions to your suggestion of euro bonds ranged from, “good that somebody said that,” to that you should stick to your job running a bank, as one cabinet member put it. Why euro bonds, and why now?
Martin Blessing: Mario Draghi promised to do everything possible to rescue the euro and that calmed everybody down about monetary union. But it didn’t really address the fundamental problems; the medicine we offered had side effects, as it were. For many countries, interest rates are very low again. These countries no longer feel any pressure from capital markets to drive the structural reforms that are needed. That’s why we need to work out a system where the capital market has an effect through differences in interest rates.
But regular folk might think that euro bonds aren’t there to create pressure but the opposite, that pressure would fall if debts are shared?
They should read my suggestion through to the end. But let me emphasize that my main issue isn’t the euro bond, it’s the question of how to get to a place where we have more fiscal discipline and structural reform – how we can control and limit the accumulation of debt.