How many Op-Eds can people write saying that without a eurobond the eurozone will fall apart? I don’t think SPD would support the idea if they were in power; it is instead a way to set up an “I told you so” on Merkel, when things go badly, as they will. It is hard to imagine that all the eurozone countries would sign off on it, and how does the market handle the political uncertainty in the meantime? Finland has been demanding collateral for its loans to Greece and other countries wish to follow suit, and that is what any agreement would look like ex post. That’s assuming every country finds it constitutional, a heroic leap. Or what if German bond rates skyrocket after a eurobond announcement? Does everyone go read Jean Tirole on renegotiation-proof agreements? A eurobond without Germany, and possibly without France, also collapses inductively. Or say Merkel agreed tomorrow to a eurobond and managed to hang on to power. What fiscal management conditions would be demanded in return and would anyone expect Greece to accede to them? How long does it take seventeen nations to agree anyway? Does all borrowing get run through the eurobond or just some? How are borrowing adjustments at the margin to be settled? What if a country won’t put its fair share into a eurobond reimbursement fund, instead preferring to prioritize its individual creditors? Who or what punishes them? Are markets these days good at picking apart bundled assets?
It’s easy fodder to criticize Merkel for saying no to the eurobond idea, but it’s a non-starter which could not make it off the drawing board. I haven’t even considered the extreme moral hazard problems which would result from actually doing the idea.