Scholz, German Chancellor, Supports EU Bond Issuance to Address Energy Crisis

Olaf Scholz, German Chancellor [Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] German Chancellor Olaf Scholz supports the issuance of joint bonds at the European Union (EU) level to respond to the European energy crisis, Bloomberg News reported on the 10th (local time), citing sources.

Bloomberg explained that Chancellor Scholz's support for EU bond issuance marks a significant shift in the German government's stance, which had been negative about sharing joint debt burdens. However, Scholz is known to support the issuance of EU joint bonds on the condition that support for energy crisis countries is provided in the form of loans rather than grants.

When Scholz arrived in Prague, Czech Republic, on the 7th to attend the EU summit, he did not express a clear position on joint bond issuance. At that time, Scholz emphasized that there are still many unused funds from the loans and grants prepared by the EU during the COVID-19 pandemic response.

The reason the German government supports the joint debt burden plan appears to be influenced by the recent criticism from various European countries after the German government announced it would spend 200 billion euros independently to reduce energy costs for households and businesses.

The scale of support has not yet been specifically determined. However, it is expected to be smaller than the 2020 COVID-19 recovery fund. Bloomberg explained that in 2020, the German government declared for the first time that EU member states would jointly bear debt burdens to respond to the economic crisis. Scholz participated in the EU recovery fund discussions as Germany's finance minister at that time.

According to sources, Scholz remains cautious about new EU bond issuance because a final ruling on whether the EU recovery fund complies with the German constitution has not yet been made. In a preliminary ruling last April, the German Constitutional Court supported the recovery fund, stating that restricting it could pose greater potential risks. However, the court judged that EU joint bond issuance could comply with the constitution only if it is a one-time measure.

The upcoming formation of Giorgia Meloni's new government in Italy is also considered a variable. Meloni, leader of the Brothers of Italy and a strong candidate for Italy's next prime minister, has argued that the EU recovery fund plan needs slight adjustments.

Sources said that Scholz wants new EU bond issuance after confirming the contents of the Meloni coalition agreement and the EU negotiation process.

This content was produced with the assistance of AI translation services.