Here Is The Real Reason Germany Is Scared Of Eurobonds

Angela Merkel

[credit provider=”AP”]

So, Angela Merkel is still saying that she is opposed to Eurobonds, even though many suspect that she may be hiding her true intentions.If this is true, why would she engage in this deception? Some have already pondered it might be her best bet at keeping her coalition government together, for the time being at least.

However, Der Spiegel presents another idea — that government research has found that the bonds are simply a very rough deal for Germany.

The very way that the bonds will work means that countries with lots of debt and poor economies will share the risk on the bonds with countries with little debt and good economies:

Consequently, countries with solid economies, like Germany, would have to pay more. [Finance minister Wolfgang] Schäuble’s experts have already calculated just how much of an extra burden this would be on Germany’s federal budget. During the first few years, the amounts involved would be relatively manageable. In the first year, they believe that the federal budget would face extra costs of €2.5 billion ($3.6 billion). During the second year, they say, the additional expenditure would be twice as high. After 10 years, they contend that the additional borrowing costs would amount to between €20 billion and €25 billion.

Read more at Der Spiegel >