For weeks, Angela Merkel has been giving a resolute ‘Nein’ to the proposal that the eurozone should issue common bonds, so-called ‘coronabonds’, to help Italy, Spain and others to avoid a sovereign debt crisis. She has balked at ideas for a ‘transfer union’ — or that EU governments should share liability for government debt. But now it seems she has caved, throwing her support behind a €500 billion fund for this very purpose. It now awaits approval of the EU member governments.
Merkel knows, of course, that Austria, Finland and other frugal nations will protest. While she is sincere in her ambition to protect the European project, she isn’t exactly its Good Samaritan. Nor is she prepared to put too much German money at risk. Shrewdly, she knows the proposal will be watered down in the next few months, if it ever is agreed.
Merkel is also managing a domestic problem. Two weeks ago, the country’s constitutional court blew a big hole in Europe’s crisis management philosophy when it asserted that the European Central Bank may have violated the German constitution when it helped distressed eurozone economies by buying their debt. In effect, the judges in Karlsruhe warned that they could put a stop to that — including forthcoming efforts to save Italy from a debt crisis.