Bloomberg News

Merkel Said to Say She Sees German Yields Rising as Crisis Ebbs

March 27, 2012

German Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

German Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

Chancellor Angela Merkel told lawmakers that she expects German borrowing costs to rise as the debt crisis ebbs and the country’s status as a haven wanes, according to two party officials who took part in the meeting.

Merkel made her comments to lawmakers of her Christian Democratic Union at a regular meeting in parliament in Berlin today, according to the officials, who spoke on condition of anonymity because the briefing was private.

Yields on 10-year German notes, known as bunds, pared declines after her remarks were reported before resuming their fall. The notes yielded 1.89 percent at 5 p.m. in Berlin. That compares to as low as 1.67 percent in September when investors concerned that Greece was headed to default piled into debt of AAA rated Germany, Europe’s biggest economy.

Merkel’s prediction underscores her increased sensitivity to markets amid the region’s debt crisis now in its third year. Her 2010 demand that investors share the cost of bailouts deepened the turmoil as she fought what she called “a kind of battle” with investors.

She has since cited bond markets to help support her policy positions. Yesterday, she said yields in Spain and Portugal showed “great sensitivity and fragility” as she backed efforts to increase the financial firewall against the crisis.

Schaeuble on Bailouts

Finance Minister Wolfgang Schaeuble also briefed lawmakers, telling them he sees no scenario under which the current euro- area rescue fund, the European Financial Stability Facility, will have to issue new bailouts in the next three months, according to a ruling party official.

Schaeuble said that no new rescues will have to be made between now and the establishing of the permanent fund, the European Stability Mechanism, at the beginning of July, the CDU official told reporters on condition of anonymity because the meeting was held in private.

Schaeuble said that the EFSF bailouts will keep running alongside the ESM once it is set up, but that the rest of the EFSF pot won’t be transferred to the permanent fund, the official said.

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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