Germans Show Reluctance To Bail Out Eurozone
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Stock markets in Europe were not impressed today with yesterday's mini summit between the leaders of France and Germany. Nicolas Sarkozy and Angela Merkel offered no new, dramatic plan to solve the European debt crisis. But their cautious approach got a better reception in Germany.
As NPR's Eric Westervelt tells us, Germans are increasingly reluctant to bail out the Eurozone as they face bad economic news of their own.
ERIC WESTERVELT BYLINE: Export-dependent Germany saw almost zero growth last quarter as imports grew faster than exports. That news made the results of Tuesday's meeting between Nicolas Sarkozy and Angela Merkel seem even more modest. The leaders proposed to increase fiscal cooperation and encourage balanced budgets among countries using the euro. Those proposals fell far short of any big plan to rescue the debt-burdened eurozone. But today, at home, Chancellor Merkel's stance is playing well with taxpayers, many of whom deplore the idea of Germany spending even more to prop up spendthrift neighbors.
ERIC WESTERVELT: Sixty-four-year-old Berliner Dirk Broring(ph) walked his dog in a sun-filled park along Spree River. He said Merkel did what is appropriate and prudent - small steps toward fiscal integration, not some grand quick fix.
DIRK BRORING: The markets will attack anyway whatever you do. So there's not much that can be done in terms of, you know, one big solution. It will take a lot of time.
WESTERVELT: Merkel and Sarkozy Tuesday ruled out expanding the size of the European rescue fund and, for now, rejected moving toward issuing euro bonds. Many financial analysts believe such bonds, which would spread the debt among all eurozone countries, are vital to stopping the speculative attacks on individual debt-burdened European countries. They fear that the leaders yesterday merely postponed the inevitable. Yet Broring and thousands of other Germans firmly support Merkel's continued opposition to the idea.
BRORING: Just to throw more money in there without having commitments from the countries in trouble regarding their budgets and so on, I don't think that will be useful. So I think they should try to put much more restraints on those countries before they even think of throwing more money, then issuing euro bonds.
WESTERVELT: But Merkel's success in bolstering her domestic political base is part of the problem, says Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats. Today, on ARD TV, Steinmeier charged that the chancellor is too focused on keeping her fragile coalition together rather than offering bold leadership for rescuing the eurozone.
FRANK-WALTER STEINMEIER: (Through Translator) By avoiding the issue of euro bonds, Merkel and Sarkozy have made a fatal mistake. It shows that this government spends 24 hours a day pandering to its junior coalition partner, the FDP, preferring the quiet life over real governing and real action.
WESTERVELT: Many in the financial markets also want concrete action, not just proposals for better fiscal integration. Ferdinand Fichtner is chief economist at the German Institute for Economic Research. He thinks, at the very least, the leaders need to be far more realistic about the need to, again, increase the size of the European rescue fund for indebted countries.
FERDINAND FICHTNER: I think in the short run, euro bonds could actually solve our current problems, but I'm not convinced. And I don't really see why euro bonds should solve those problems better than an increased stability fund. At least, if Spain and Italy and maybe even France remain in the line of fire of the markets, we have to think about whether we increase the stability fund.
WESTERVELT: Fichtner favors that approach. He argues that creating euro bonds without tighter, more integrated fiscal policies among eurozone states may only increase the debt and discourage fiscal prudence of already troubled countries. Eric Westervelt, NPR News, Berlin.
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