By Darrell Delamaide, MarketWatch
WASHINGTON (MarketWatch) — Don’t mess with German Chancellor Angela Merkel.
One of Germany’s top bankers had the audacity this week to come out in favor of joint eurobonds and was promptly put in his place by government officials.
Martin Blessing, chief executive of Germany’s second-largest bank, Commerzbank AG /zigman2/quotes/207286669/delayed XE:CBK -3.11% , argued in an op-ed that issuing the common bonds could cement the euro’s /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0675% role as a global currency and give euro countries greater incentive to practice fiscal discipline.
Calling for joint eurobonds is like waving a red cape in front of Berlin, however. Merkel’s government has vehemently rejected any talk of bonds backed by all of the euro countries.
“Instead of an ill-timed comment on this topic,” said Steffen Kampeter, a top official in the Finance Ministry, “Mr. Blessing should concentrate on his job as chief executive.”
Calling for joint eurobonds is like waving a red cape in front of Berlin.
Ouch. The fact that the German government had to pump 18 billion euros into Commerzbank during the financial crisis and still owns 17% of the bank evidently entitles government officials to tell its chief executive to keep his mouth shut.
However, Martin Blessing isn’t just any chief executive. He hails from a banking dynasty that includes his grandfather, Karl Blessing, who was head of Germany’s central bank, the Bundesbank, when that still meant something, and his father, Werner Blessing, who was a member of Deutsche Bank’s executive board.
Moreover, his father-in-law, Paul Wieandt, was head of the bank owned by the trade unions, Bank fuer Gemeinwirtschaft, and his wife, who he met while studying at the business school in St. Gallen, was a partner at Goldman Sachs.
Commerzbank has had its share of problems, many stemming from its 2009 acquisition of the failing Dresdner Bank, but most of them can’t be laid at Blessing’s feet and it’s no reason to dismiss a reasonable proposal in so cavalier a fashion.
But Berlin is beyond reason. The quick reprimand of Blessing is further evidence that Merkel’s government remains ready to fend off any attempt to put German taxpayers on the hook for problems in Italy or Spain or other peripheral countries — even though the joint currency scheme devised in the Frankfurt is the source of their problems.
Blessing’s logic was that mutualization of the euro debt was already a fait accompli due to the bonds issued by the European Stability Mechanism as well as the pledge by European Central Bank President Mario Draghi to purchase euro country bonds if necessary.
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By issuing joint eurobonds, Blessing reasons, the EU would give investors a safe bet, but would also set a standard for peripheral countries to meet if they hoped to compete in global capital markets for funds they needed beyond what would be covered by the common eurobonds.
Currently, with debt mutualization coming through the “back door,” these countries feel no such compulsion to reform, he said.
It’s a subtle argument not designed to convince closed minds. While numerous economists have already urged the EU to adopt common bonds, Merkel and her cohorts have refused to entertain the idea.
Blessing has taken his lumps before as Commerzbank struggles to regain a competitive position in a desolate banking environment. The bank, historically Germany’s third-largest after Deutsche Bank and the now-defunct Dresdner, has flirted with disaster often enough over the decades, so its current problems are nothing new.
But the arrogant putdown from a government functionary is only the latest evidence that Berlin is ruling out any change in its stance — a refusal to share the prosperity it owes to a joint currency skewed in its favor.
Kampeter, a member of Parliament assigned as “parliamentary state secretary” to the Finance Ministry, studied economics, but as a member of Merkel’s Christian Democratic party is bound to toe the party line.
Blessing, of course, is not running for office, as is Merkel, who can match any politician for being in permanent campaign mode. She is in her 10th year as chancellor and it’s a safe bet she would like to top the 16 years her onetime mentor, Helmut Kohl, held the office.
The German voters love her and she may well get her wish, though it remains to be seen whether she will fulfill Kohl’s vision of a united Europe or be responsible for dismantling it.
In the meantime, chief executives of banks dependent on state aid, members of the Christian Democratic Party, and virtually everyone else would be well-advised not to mess with her.