Many are pushing for joint euro bonds that would unify and ultimately stabilize euro zone economies, but they would cost the region’s largest and strongest economy, Germany (NYSE:EWG), billions of euros each year.
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According to Der Spiegel magazine, “In the first year it would mean 2.5 billion euros of additional interest rate costs for [German] Finance Minister Wolfgang Schaeuble’s budget, in the second year the costs would be twice that.” The article in the German magazine goes on to say that, by the tenth year, Germany’s additional costs would be around 20-25 billion euros.
Der Spiegel’s calculations are based on euro bonds that would have interest rates 0.8% higher than those of German (NYSE:EWG) sovereign bonds. The estimated euro-bond interest rate is based on bonds the European Central Bank currently sells to finance its bailout programs.
German Chancellor Angela Merkel reiterated her opposition to the joint bonds Friday, calling them a “slippery slope” that would leave everyone worse off. Schaeuble followed suit on Saturday, saying joint bonds would make a uniform fiscal policy for all of the euro zone necessary.