MUNICH – German Chancellor Angela Merkel has withstood the pressure from southern Europe: there will be no Eurobonds. For the markets, this is a disappointment, but there is no other way for these countries to rebuild themselves than to insist patiently on a phase of debt discipline and an end to lax budget constraints.
Investors in Europe’s troubled economies are already getting enough as it is. Eurozone leaders’ decision on July 21 to allow the European Financial Stability Facility to buy back old debts – limited only by the EFSF’s capacity – already amounts to a type of Eurobond. And the European Central Bank will also blithely continue its bailout policy in terms of giving loans to the eurozone’s troubled members and purchasing their government bonds.