06 April 2020

FT: Coronavirus crisis prompts German rethink on eurobonds

A broader trend in Germany, as this crisis forces politicians, economists and academics to reassess some of their most cherished principles and throw overboard beliefs that once seemed sacrosanct.

The first casualty of the crisis was the “schwarze Null” or “black zero”, the doctrine of no new borrowing relentlessly pursued by Angela Merkel’s government for much of the last decade that delivered six years of budget surpluses. This was abandoned in spectacular fashion last month when Olaf Scholz, finance minister, unveiled a €150bn emergency spending plan largely financed by new debt and a suspension of the country’s constitutional ceiling on budget deficits. Some think that the traditional German resistance to eurobonds could end up going the same way if the crisis escalates. “Germany’s traditional red lines might end up not so red any more,” said Lucas Guttenberg, deputy director of the Jacques Delors Centre, a think-tank.

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