Merkel Rejects Joint Euro Debt, Promises to Stay Hard Course

German Chancellor Angela Merkel told supporters she’ll stand as a bulwark against joint debt in the euro area if she’s re-elected in four days and continue to extract conditions from indebted nations.

Speaking at an election rally of several thousand at a portside warehouse in Hamburg yesterday, Merkel denounced plans that have been supported by the opposition Social Democrats, such as a debt-redemption fund and jointly issued euro bonds to overcome the nearly four-year-old European debt crisis.

“We help each other in the euro area, but we have good reason to help only under conditions — that other countries bring order to things that are right now not in order,” Merkel told the crowd. “Whether we continue on this path is what you’ll decide on Sunday.”

With polls showing the election tightening, Merkel showcased her stewardship over Germany’s record-low unemployment and her guidance of the country through the debt crisis. Should her Christian Democratic-led bloc fall short of a majority with its Free Democrat coalition partner, Merkel may be forced into a so-called grand coalition with the SPD.

Merkel’s CDU bloc fell a point to 39 percent, while the SPD gained a point to 26 percent, according to an Allensbach survey published yesterday. The poll indicated that neither party has enough votes to form a government with its favored partner.

The party calculus has made the election a question of whether Merkel can hold on to her coalition with the pro-business FDP, whose support has plummeted in four years, as she looks likely to secure a third term as chancellor. In an ARD broadcast interview yesterday, Merkel was asked whether she would continue the partnership even with a one-seat majority.

‘Nothing Unusual’

“Obviously we are campaigning for more votes than that, but narrow majorities in Germany are nothing unusual,” she said.

Across town, the SPD’s Peer Steinbrueck held his own rally in the northern port city where both candidates were born. Steinbrueck has said that Germany will have to foot the bill for euro rescues such as Greece, and that the euro area has always been a “liability union.” The SPD has said that there’s no way to avoid pooling debt in some form.

Merkel spoke to a crowd packed into Hamburg’s Fish Auction Hall on the banks of the Elbe, with CDU supporters waving their trademark orange “Angie” placards, many cheering and shouting, “yes!” when she took specific aim at a debt-redemption fund designed to pool euro-area debt and euro bonds.

“I’m firmly convinced that we won’t make Europe stronger – – Europe has to emerge stronger out of this crisis — if we’re too indulgent with one another, if we can’t rely on what we’ve promised to do,” Merkel said.

Main Challenger

Steinbrueck, Merkel’s first-term finance minister turned main election challenger, says her austerity push has divided Europe, and he advocates more emphasis on growth.

Steinbrueck’s strength “is his power of economic judgment, something that Merkel lacks,” Helmut Schmidt, the former Social Democratic chancellor, was cited as saying in an interview published in Bild newspaper yesterday.

Both candidates will continue their campaigns through the end of the week. Merkel winds up her campaign Sept. 21 in Berlin and in Stralsund, the main city in her electoral district on the Baltic Sea. Steinbrueck will hold his final rally in Frankfurt, Germany’s financial capital in the western state of Hesse, which holds regional elections on the same day as the federal ballot.

Source: Bloomberg