INVESTORS WANT EUROBONDS BUT WITH MORE EUROPEAN INTEGRATION

From reading more articles on Eurobonds it appears that Merkel and Schauble are not alone in their scepticism of Eurobonds, but they are in a large minority.

However, the sceptics agree with Merkel that in order for the Eurobond to work there must be further European integration.

An article in the FT looked at investor attitudes to the Eurobond.

Around 55 per cent of CFA Institute members surveyed agree that eurobonds would alleviate the sovereign debt crisis. A slight majority also considered eurobonds would reinforce financial stability in the euro area. 41 per cent disagreed that eurobonds would improve market efficiency.

Investors in this survey believe that new financial instruments will not cure structural imbalances in trade or help competitiveness, lack of growth and public over-indebtedness. In other words, to be effective eurobonds would have to be associated with deeper structural reforms, fiscal integration and a strong common governance framework.

[source : Investors divided over use of eurobonds, FT, 13/05/2012]

But isn't this what the Eurocrats want too? A bigger, stronger Europe?

Merkel's party has been taking a beating in elections recently, seen as a vote against her austerity measures. So a relaxation of her resistance to growth would go down well in Germany too.

They all want growth. They all want a bigger and stronger Europe. This would also attract investors who would invest in Eurobonds.

But who are the investors? Goldman Sachs? JP Morgan Chase?

Anyhoo, on 23rd May, this Wednesday, at a meeting in Brussels we could well see a significant change in Merkel's position. Most European leaders and finance ministers, including The Oik, see Eurobonds as a quick-and-easy-to-implement solution. Merkel has so far opposed them, but recent elections in Germany have shown that not everyone in Germany loves her brutal austerity, and the statement from the recent Camp David G8 meeting promised jobs and growth, not fascist austerity.

The question is how to spin it so that Merkel does not lose too much face?

Even Rothschild gimp Niall Ferguson says Eurobonds are the only solution, suggesting that Germany and Greece are bluffing, playing chicken but both will avoid a collision at the last second.

“The Greeks say, ‘We’re not going to comply with our commitments’. The Germans say, ‘Then you’re out’. They’re both bluffing.” And so, he argues, Germany — through gritted teeth — will have to concede that Europe as a whole must stand behind the debts of individual nations. Welcome to the era of the eurobond.

But surely this is just the sort of notion to which Germany has hitherto shown such resistance? “The Germans have the biggest interest in preserving the euro,” Ferguson says. “It has been highly advantageous to German business not to have a super-strong Deutschmark, and I think that’s one of the reasons Germans will swerve in this game of chicken, because anything that threatens monetary union is pretty threatening to German business . . . Germans are going to have to make some kind of concession to the periphery. It’s not enough just to say ‘austerity, austerity’.

[source : One Nation (under Germany), http://www.langaa-rpcig.net/+One-nation-under-Germany+.html, 20/05/2012]

Expect Eurobonds and a bit more integration?