* Blessing says common liability already a reality in Europe
* German finance minister, Deutsche Bank head reject bond
* Government holds 17 pct stake in Commerzbank after bailout
(Adds comments from German government, Commerzbank CEO)
BERLIN, Sept 3 The German government sharply
criticised the head of the country's second-largest lender
Commerzbank on Wednesday for suggesting Europe revive
the idea of common euro zone bonds, with one official urging him
to stick to banking.
Martin Blessing, chief executive of the bank in which the
government holds a 17 percent stake, wrote in an opinion piece
in German daily Handelsblatt that euro zone bonds would
"permanently establish the euro as a globally important
currency" and ensure European competitiveness.
Chancellor Angela Merkel repeatedly rejected calls by
European partners like France and Italy to introduce such bonds
during the height of the euro zone's financial crisis, arguing
that they would remove incentives for member states to reform
and clean up their finances.
Steffen Kampeter, deputy finance minister and a member of
Merkel's Christian Democrats (CDU), swiftly shot down Blessing's
idea on Wednesday, saying euro bonds were "totally off the
"Instead of occupying himself with an untimely subject like
this, Mr. Blessing should concentrate on his role as chief
executive," Kampeter said.
Chancellor Angela Merkel's spokesman said at a news
conference Germany was not considering common euro zone bonds.
"For us, the issue of eurobonds is not up for debate. The
German government's basic position has not changed on this in
any way," Steffen Seibert said.
Speaking at a banking conference in Frankfurt, the co-chief
executive of Deutsche Bank Anshu Jain also rejected
the idea, saying he preferred the "discipline" of individual
states issuing debt.
In his newspaper column Blessing said the European Central
Bank's (ECB) response to the euro zone debt crisis, and bonds
issued by the European Stability Mechanism (ESM) bailout scheme,
meant common liability was "already a reality" and that "euro
bonds have already been introduced virtually by the back door".
As well as being attractive for investors, Blessing said, a
legally-binding framework for such instruments would have the
advantage of giving member states "strong incentives for fiscal
At the same Frankfurt conference where Jain spoke, Blessing
elaborated on his comments.
"We feel much better today than three years ago, but not
enough has happened (in terms of structural reforms)," he said.
"Time has been bought. But is it being utilised?"
"Today investors are betting that there will be a bailout,"
Blessing said, adding that according to his blue print for euro
bonds, governments would be allowed to default again.
Countries should be allowed to issue debt equivalent to 25
percent of their GDP in euro bonds carrying a low, default-risk
free coupon, he said. The remainder of the debt would have to be
issued in bonds carrying a country's specific credit risk.
"I don't know if there will be majorities supporting these
ideas," Blessing said, adding that something needed to be done
to avoid policy makers becoming complacent given the current low
rates for government borrowing.
Kampeter said that, on the contrary, that sharing liability
in the euro zone would exacerbate problems by "reducing member
states' incentives to carry out important structural reforms".
Commerzbank was one of the highest-profile casualties of the
global financial crisis. The government spent about 18 billion
euros bailing out out the bank.
(Reporting by Stephen Brown, Michelle Martin and Madeline
Chambers in Berlin and Arno Schuetze and Thomas Atkins in
Frankfurt; Editing by Dominic Evans)