German Chancellor Angela Merkel bluntly told German law makers on Tuesday that Europe would not share debt liability for debt “as long as I live”, removing any speculation that Germany may be open to sharing some of the heavy debt burden that is weighing down some countries in the euro area.
The Daily Telegraph reported that the German audience “reacted with applause to hearing that the Chancellor does not want a joint debt liability,” while one participant reportedly shouted: “We wish you a long life!”
Merkel criticized the euro overhaul proposals for putting too much emphasis on shared liability and not enough on control of overspent budgets, according to a party official who was in the room and reported in Bloomberg.
Chancellor Merkel has been facing recent pressure from French President Francois Hollande and Italian Prime Minister Mario Monti to support new proposals to issue jointly guaranteed debt to reduce borrowing costs for struggling euro area countries.
According to a draft seen by Reuters, the parties in Merkel’s centre-right coalition proposed allowing a new permanent rescue fund, known as the European Stability Mechanism (ESM), to funnel aid directly to national bank rescue funds.
During the summit, it is expected that EU leaders will discuss the topic of implementing a new banking union which allows the ECB to to supervise big cross border banks. However, Germany remains opposed to the joint deposit guarantee or common bank resolution fund, according to Reuters.
The EU summit is expected to reach an agreement on a growth package inspired by France and estimated around 130 billion euros ($162 billion USD) which includes infrastructure project bonds, reallocated regional aid funds, and European Investment Bank loans.