German coalition may be open to euro zone bonds - report

BERLIN (Reuters) - German backing for the issuance of joint euro zone bonds is no longer being categorically ruled out in Chancellor Angela Merkel’s coalition, German daily Bild reported in an advance of an article to appear in its Thursday edition.

The report was quickly rejected as wrong by several officials in Merkel’s centre-right coalition.

The normally well-informed daily quoted parliamentary sources in the ruling coalition saying various scenarios are being discussed that could make German backing necessary for the common bonds the government has firmly rejected until now.

“The German government could, for example, be forced to come up with something in return for a tightening of the euro Stability Pact,” Bild wrote in the advance on Wednesday, indirectly quoting parliamentary sources in the coalition.

Merkel and her government have repeatedly rejected the issuance of joint euro zone bonds. In a speech in parliament on Wednesday she called a joint euro zone bond issuance “extraordinarily inappropriate.”

In a Reuters story on November 18, aides to Merkel said she might permit bolder measures to fight the euro zone sovereign debt crisis if European Union partners would agree to treaty changes that Germany has been seeking to impose intrusive fiscal discipline.

Several officials rejected the Bild report on Wednesday evening. A spokesman for Merkel declined any further comment as Merkel has already spoken out against euro bonds.

“Euro bonds are interest rate socialism and socialism is always the wrong way to go,” said Rainer Bruederle, parliamentary floor leader of the Free Democrats (FDP) that share power with Merkel’s conservatives (CDU/CSU).

Another leader in the FDP said: “We would never let that pass anyhow. But it isn’t even necessary to block (it) because the CDU/CSU doesn’t also doesn’t want euro bonds in any form.”

A spokesperson for the CDU/CSU parliamentary group added: “There’s nothing at all moving there.”

Reporting By Erik Kirschbaum; Editing by Leslie Adler