This commentary is a great illustration of the reductive nature of Germany's coronabond debate and helps explain why the push is going nowhere. (THREAD) 1 https://twitter.com/tagesthemen/status/1248607874638479361

The commentator, a correspondent for German state tv, argues debt mutualization risks "taking an axe to northern Europe's political landscape" and would play into the hands of populists. 2

He also claims that the EU (under the rescue package agreed in Brussels this week) will send "gigantic" amounts of money from north to south. "These are sums that make even the rescue of Greece look like peanuts," he says. 3

The first argument is essentially what Gideon Rachman wrote this week in the FT, i.e. coronabonds would unleash a populist backlash in N. Europe. By this logic, it's wiser to give the populists what they want (and rob them of potent issue, instead of fighting for the principle. 4

That might strike some as feckless, but it is exactly the course Merkel has followed throughout most of the euro debt crisis. Opposition to the early bailouts gave rise to the AfD. Merkel and Schäuble responded to the threat by taking an extremely hard line towards Greece 5

That made the rescue longer, deeper and more expensive (fo all) than it would have otherwise been. But in Germany, it worked. By 2015, the AfD was below 5%. (Its resurrection came as a result of the refugee crisis and a shift in focus away from the euro to migration) 6

The commentator's second argument on "gigantic" sums being sent from north south under the Eurogroup's new plan in the name of solidarity is simply false. 7

First, a planned 240 billion euro credit program would rely on the ESM, the eurozone's bailout fund, which is backed by all eurozone countries. Together, France, Italy and Spain have contributed a third more capital to the fund's base than Germany, NL, Austria and Finland 8

The other instruments, such as loan guarantees for businesses from the European Investment Bank, also rely on the principle of shared liability. Due to its size, Germany is always the largest payer, accounting for slightly more than one quarter of the total. 9

In the popular German imagination, however, thanks to commentaries like this one, Germany is paying the lion's share. 10

That's also how many, if not most Germans, saw the Greek rescue program; i.e., it was effectively Germany paying for Greece (never mind that Greece has to pay most of the money back). 11

The commentator here tries to bolster his argument that coronabonds unnecessary with the claim that what the EU plans to send south will make Greece looks like "peanuts." In other words this is true "solidarity," obviating the need for contentious coronabonds. 12

Here again, that's simply untrue. The total value of the various Greek programs was nearly 300 billion euros. So far, the EU has proposed just over 500 bln euros in corona-related relief. 13

Unlike the Greek payments (which went to service debt and recapitalize banks), much of the corona aid is in the form of loan guarantees. 14

In other words, there's about 500 billion for the 19 eurozone countries, vs circa 300 billion that went to Greece. Given that Greece is one of the smallest economies in the eurozone, that's hardly "peanuts." If anything, the reverse is true. 15

To sum up, specious as German state media's argument might be, they shouldn't be ignored because they represent the country's conventional wisdom. It's worth noting that this commentary was shown during one of the main evening news broadcasts. So the message will be heard. 16

Coronabonds would have been a tough sell no matter what. With a united front of Germany's conservative-led government and state (and much of the private) media campaigning against the idea, they're less likely than ever. 17/End