Pressure now on Germany for Eurobonds

Spiegel is reporting that European Commission President Jose Manuel Barroso plans to talk up Eurobonds on Wednesday and to present three different options for issuing Eurobonds as a solution to the European sovereign debt crisis. This is an idea to which the Germans have been resistant, but according to Spiegel, Chancellor Merkel is under pressure to consider this option given her proposal to move to a tighter fiscal union

“Germany is the core, everything else is secondary”

The Wall Street Journal’s Matt Phillips describes the turmoil in European sovereign bond markets. He says some traders tell him that they now consider countries like France a part of the periphery and are pricing it as such. This risk-off sentiment has spread throughout the euro zone to countries like Finland which is the only country in the euro zone except Luxembourg which is both AAA-rated and meets all of the Maastricht Treaty requirements.

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Full Text: Moody’s takes rating actions on 12 German Landesbanken

The following is the text of the recent ratings action taken by Moody’s on twelve German state-owned banks

Nigel Farage: ‘Germany is dominating Europe’

The well known eurosceptic Nigel Farage is having a field day over the sovereign debt crisis in the euro zone. Farage says that the EU lacks democratic legitimacy, a complaint heard ever more often during this crisis. He goes further, saying political puppets are being put into place right across the euro zone. He sees this as a demonstration of a “German-dominated Europe”, something he believes the euro was supposed to prevent

The alternative to the ECB writing the check is economic collapse

German central bankers (current and former) continue to voice their hostility to what the financial community now calls a Euro-style Quantitative Easing (aka big bazooka). This talk (by one of the boldest opponents of an ECB solution to the sovereign debt crisis) reveals how weak is the position of those who prefer to explore other paths: No real alternative is offered because the alternative is economic collapse

Five uncommon observations about the European debt crisis

The escalation of the European debt crisis and mounting evidence of new economic contraction has increased the scrutiny on the region. Yet it seems like many observers may be failing to grasp several important points, including the nature of the new governments, the Italian challenge, pressure on the ECB, risks of a euro zone break up and the coming election in Spain

Merkel: Change European Constitution for greater fiscal integration by 2013

Sources close to the German government have told Reuters that the German Chancellor Angela Merkel is seeking agreement to make changes to the Lisbon Treaty, considered the European Constitution. According to Reuters’ sources, Merkel wants all 27 EU member states to sign off by the end of 2012. Reuters writes: "The government is pushing for

Video: Germany will leave the euro unless the ECB is reformed

My friend Lars Schall sent me this link. I think you have to put this in context by looking at what Der Spiegel was saying about a Greek exit. What is clear is that the taboo that Angela Merkel broke in responding to the proposed Greek referendum has put a lot of things in motion that weren’trevioulsy in motion. Everyone is talking about the end of the euro. That tells you something

Report: Germany is preparing for Greece’s exit from the euro zone

This sounds like hearsay to me, but I wouldn’t be telling you about it if I didn’t believe it was credible

Merkel: I do not ‘want to let the people vote’

Germans really are sceptical of the euro and many miss the days of the Deutsche Mark. I think Merkel is trying to make the case for why the German people have never been given a direct vote on any major euro area decision. No one wants tyranny of the majority. So I agree on the benefits of representative democracy over direct democracy at the federal level. That said, Merkel is in awkward position because it has long been clear that German elites have been leading the German people in a direction that many believe is the wrong direction. If the European economy collapses in a heap and leaves Germany in a Depression, the euro itself will be blamed

Chart of the Day: This is how many periphery bonds the ECB has already bought

This chart from Der Spiegel shows you that the ECB has been buying a lot of periphery bonds. But, no matter how much they have bought, their purchases are dwarfed by the absolute magnitude of bonds coming due next year in Italy, over 300 billion euros worth

The solution for Europe’s crisis will be more integration rather than less

The German Christian Democrats hold a party congress next weekend. There are a number of proposals that members are trying to get incorporate into the party position and platform. One such proposal is to give the national central banks weighted votes on the ECB. Another set of proposals that sparked even more interest is the allow for countries to leave the euro zone. A separate proposal in this space seeks a mechanism by which a country can be forced out of the euro zone