Unions, meanwhile, are demanding the establishment of a minimum wage and changes in labor laws amid concerns that the German government is doing too little to protect the growing share of workers in low-wage jobs, now estimated at about a fifth of the workforce.
Ulrike Guerot, a senior fellow at the European Council on Foreign Relations, said Merkel cannot commit more money to the euro crisis without risking an open fracture between haves and have-nots in Germany. In recent years, Guerot said, “there have been extensive gains but they have been unevenly distributed.”
‘Not what we signed up for’
Germans joined the currency union a decade ago with some trepidation. They feared they could be stuck with the bill for other, less-productive economies in Europe and insisted on a “no bailouts” clause in the treaty establishing the union.
That clause was circumvented when European leaders created the recent emergency loan program. They said it was allowed under the section authorizing countries to aid each other in the case of natural disaster. The program is being challenged in the German courts.
“You can say it is better to share,” Guerot said, but “people will argue this is not what we signed up for: ‘We have options. We can go global alone.’ ”
Those resentments are a reason some of the proposed “once and for all” solutions to Europe’s problems could be out of reach.
Consider the eurobond. It is elegant in theory — a form of debt issued in the name of all 17 countries and backed by the economic resources of a major industrial region. Advocates say a eurobond would rival U.S. Treasury bonds, in the size of their potential market and their perceived safety as an investment, and — in a stroke — wipe away concerns about the riskiness of government debt in Europe.
But this would also represent an all-in bet by Germany, with its fortunes rising and falling with those of Greece, Ireland, Italy and other troubled economies. That is seen here as a recipe for higher interest rates. Local business publications have estimated that Germany, which pays record-low interest rates to borrow money, might have to ante up $45 billion a year more for its share of the debt service on eurobonds.
And there is an array of thorny questions: How much to issue each year? Who gets the proceeds? How to make sure the money is properly spent?
In a recent interview in Der Spiegel magazine, finance minister Wolfgang Schauble said that if such a bond were created, it could come at the end of a long process during which, in effect, Europe’s nations would submit their sovereign spending power to a common financial authority.
At their meeting in Paris, Merkel and Sarkozy suggested the start of this process. They reached agreement that the two countries would confer more closely on tax policy and encourage the other euro countries to meet more regularly on economic policy. A new euro-zone council would be established, with still-undefined powers for its president.
Without deep coordination, said Deutsche Bank economist Thomas Mayer, eurobonds and other expansive changes are unlikely, for a familiar reason.
“Germany taxpayers would be responsible for spending decisions in other country’s parliaments. You cannot do that without consequence,” he said. “You’d see a movement in the northern European countries that would be a true successor of the American tea party.”
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