German Debt Sharing Plan Reanalysed in Bid to Gain Support

Proposals on debt sharing in the euro region are being reanalysed by the German Chancellor Angela Merkel and her council of economic advisers, said Lars Feld, a council member.

Feld, a professor of economics at the distinguished Freiburg University, also indicated that the government were slowly edging towards the council’s proposal for a European redemption fund. As a result, he said that the council consisting of five members was now backed by opposition parties and is now seeking votes from government ministries on the fund’s proposals.

Three areas have been focused on in order for the plan to be more widely received however, Feld revealed in a Berlin based interview earlier on today. These are addressing “opposition to its sheer size” with the council obviously being viewed by many as rather too small, worries it may fail to correlate with Germany’s constitution and diplomatic treaties and the range of its proposals on the liability of member states.

The proposal was launched by the independent council of advisers in November, and Merkel then said that by it, legal concerns were being raised.

Due to a range of requests made by German opposition parties in return for supporting new European fiscal rules in parliament, the proposal has been chucked back unto debate board. Both sides have set a deadline of June 13th by which the proposal must be studied.

Thus those in the euro zone, desperately seeking to compare credit cards and whatever other means by which they hope to alleviate themselves of the continents grappling debt, may find a euro in the council.

With an expected worth of $1.8, the fund is supported by the gold reserves of euro member states. Debt worth over 60 percent of Gross Domestic Product would be capable of being transferred by countries, which are labelled as jointly and severally liable for the fund, the council’s paper has revealed.

However, Merkel’s government says it has “considerable reservations” about the fund, concerning the possibility of it violating the international treaties and just as importantly – if not more – the German constitution, according to Steffen Seibert, Merkel’s chief spokesman today.

Feld’s answer to the conundrum of garnering more support for the fund rests in a substitution of “joint and several liability” for the fund, by “several liability”. Whether this will work or not remains to be seen, however it is probable that this will succeed in limiting the potential fallout to states on a scale based on their economic weight.