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Wolfgang Schäuble, German finance minister, has hinted at a softening of
Germany's position on eurobonds in return for closer fiscal integration.
Meanwhile German banks' exposure to Ireland is €25bn.
Schäuble said in a newspaper interview published yesterday, that
the proposal on common bonds could be looked at if there were fundamental
changes in the way the Eurozone operates.
The finance minister
highlighted the need for a “discussion about how
decision-making in Europe can be made more efficient."
“In 10 years we will have a structure that will resemble
far more what one describes as political union,” he told
Bild am Sonntag newspaper, the Sunday version of Bild, the
mass-selling tabloid, which earlier in the year had led a
campaign against bailing-out Greece.
Last week Chancellor Merkel rejected a proposal to launch common bonds,
saying that they wouldn't provide the appropriate economic incentives.
The proposal for creating a eurobond was put forward last Monday by
Jean-Claude Juncker, prime minister of Luxembourg and chairman of the Eurogroup
of Eurozone finance ministers and Giulio Tremonti, Italian finance minister, in
an article in the Financial Times.
On Wednesday, Juncker accused Germany of being “un-European” and
“a bit simple” in declaring some areas “taboo” in EU negotiations.
Schäuble in his Sunday interview also presented a more positive tone towards
smaller countries in the Eurozone, saying if any country was to quit, the euro,
“the consequences would be
unpredictable. And looking at the effects of the Lehman
bankruptcy, I say: let’s not make the same mistake twice,”
he told Bild am Sonntag.
“Those who bet their money against the euro will have no
success,” Schäuble said. “The euro
The finance minister also rejected calls for a return to the Deutsche
mark. “Anyone who looks at the development of
the German economy knows that our international
integration is greater than any other economy,” Schäuble said. “Without the euro our own
currency would experience a rise in value with
negative consequences for exports.”
The Financial Times reports today that
European officials are considering measures to overhaul the Eurozone’s €440bn
rescue fund, including using it to buy bonds of distressed governments,
according to people involved in the deliberations.
says in its
current issue: "A 20% loss on Eurozone and British banks’ combined exposure
to Greece, Ireland, Portugal and Spain would mean a hit of about €300bn.
That is a fraction, albeit a hefty one, of the €1.1trn aggregate Tier 1
capital of the 91 European banks that were stress-tested earlier this year. Some
think the BIS (Bank for International Settlements) data overstate the
danger. For instance, German regulators reportedly believe their banks’ exposure
to Ireland is only €25bn-30bn, against a BIS number of €150bn.
This echoes the complaints of Austrian bankers in 2008, who said the BIS figures
on their exposure to eastern Europe exaggerated the true risk and panicked the
Leaders of Germany and France met to plot strategy before a key EU summit. Richard Cookson, CIO for Citigroup Private Banking, joined CNBC for more on the European crisis:
A Deutsche Bank report says that banks’ exposure to the current Eurozone
hotspots seems to be limited if measured against total bank assets. This does not rule out contagion risk due to
relatively large exposures of individual banks or non-bank financial
institutions. It says after all, market perceptions of debt sustainability
remain an important factor that may affect banking sector stability.
The DBR report says Bundesbank estimates that instead of the reported $139bn,
German banks have only €25bn actual exposure to Irish borrowers