Budgets, Not Bonds: Germany’s Merkel Talks Tough on Eurozone

Despite the fact that markets and theU.S.are pressingEuropefor faster action to resolve the crisis, Merkel advocated the slow track, saying that nations that broke rules concerning their budgets—keeping debt within 60% of GDP and deficits within 3%—could be sued in the European Court of Justice. “The lessons are very simple,” she said, “rules must be adhered to, adherence must be monitored, non-adherence must have consequences.” She added that leaders must “overcome fundamental flaws in the construction of the euro area.”

Regarding the oft-broached subject of joint euro-area bonds, Merkel dismissed them as “unthinkable” while governments retain national control over their own budgets. She said in the report, “You have to differentiate between credible enforcement powers and joint European control over revenue and spending. And as long as this is so, joint liability for the debt of others is unthinkable. That also takes care of the debate over so-called euro bonds for now.”