Merkel emphasizes 'no' to eurobonds, for now

In an interview with ZDF public television, Merkel said that, for the time being, eurobonds would be "exactly the wrong road to take" because they would lead to a "debt union instead of more stability."

"The solution to the current crisis will not be with eurobonds," she said. However she added that she did not know "whether we in the distant future will need to further adapt."

French President Nicolas Sarkozy and Merkel said at a summit in Paris Tuesday that eurobonds were not the answer "today" to the eurozone debt crisis. But they appeared to leave wiggle room for a change in policy if circumstances in the eurozone worsen, sparking rumblings of concern in Berlin.

Horst Seehofer, head of the Christian Social Union, the Bavarian sister party to Merkel's conservative Christian Democrats, told business magazine Wirtschaftswoche that eurobonds would be damaging to the European economy as well as unfair.

"The effect would be debt, inflation and the destruction of economic opportunities," he was quoted as saying in an issue to be published Monday.

Seehofer said his CSU would draw a line at attempts to share out Europe's debt burden, which he said would only stoke an "inflationary trend."

"We again turned a blind eye to the ECB buying bonds but that should not be taken as carte blanche," he said, referring to crisis-fighting measures taken by the European Central Bank.

"We will not go along with the next step - pooling debt. You cannot surmount excessive debt by spreading the burden to all."

And Vice Chancellor Philipp Rösler, the head of pro-business coalition partner the Free Democrats, had earlier ruled out eurobonds as long as his party governs Germany with the conservatives.

Supporters, including Germany's centre-left opposition, say eurobonds are a viable solution to the eurozone's debt crisis.

The strongest states, led by Germany, would underwrite weaker countries which would then find it easier to raise credit on the markets.

Opponents in Germany say it would raise the country's own borrowing costs´and remove an incentive for indebted nations to put their own fiscal houses in order.

Meanwhile Dutch Finance Minister Jan Kees de Jager urged Berlin to maintain a hard line against eurobonds, saying they would have the "perverse" effect of encouraging more debt.

"I expect the German government to maintain its policy," he told the latest edition of weekly news magazine Der Spiegel.

"In the short term, eurobonds might calm the markets. But if you don't change the underlying conditions, then you will have the next crisis in five years, which might even be much worse than the current one because then even healthy countries such as Germany or the Netherlands will be much more indebted."

German Finance Minister Wolfgang Schäuble is to meet his French counterpart Francois Baroin on the eurozone crisis Tuesday while Merkel is to huddle for a special meeting with her CDU parliamentary group that evening.

AFP/mry