SUGGESTION TO THE FEDERAL CONSTITUTIONAL COURT, GERMANY

SUGGESTION TO THE FEDERAL CONSTITUTIONAL COURT, GERMANY 

To:               The Right Honorable Federal Constitutional Court Vice President 

From:           Athinarayanan Sanjeevraja

Date:            05.10.2011

RE:               Issuance of Eurobond  

Suggestion:    Approval of Issuing Eurobond

Good Morning Prof. Dr. Kirchhof. I am writing to express that Federal constitutional court explicitly rules out Eurobonds a few weeks ago. In addition you had warned, Ms. Angela Merkel, a Chancellor of the Federal Republic of Germany, never again to propose Eurobond. This is certainly not good news for me as well as Europe. German brothers and sisters in the Euroland must help in this difficult moment with issuance of Eurobonds. I knew that any release of money under any bailout should be approved by the budget committee of the Bundestag but still your approval is must. In my view that Eurobond proposals will only succeed if there is a broad support from both Federal Constitutional Court and Bundestag.

The Honorable Justice, I recommended to issue Eurobonds because it must contribute to strengthening the enforcement of the budgetary rules, it will create a large, AAA rated bond market that could compete in size and liquidity, with U.S. bond market, European bond market is fragmented because each member states issuing its own securities, Polling issuance could help to create a large and liquid market in Eurobonds which would lower average funding costs and strengthen the competitive position of the Euro as a reserve currency, Eurobond will make it attractive for rest of the world investors, Joint Eurobond would invest public investment as a percent of their GDP. As a result public investments will boosts overall productivity in economy. 

The Honorable Justice, I agreed that there are some objections to issuance of Eurobonds. We should take care of those objections. For instance AAA countries especially Germany and Netherland may actually have to pay higher interest rates on their debt. We can make it attractive for AAA countries. AAA counties face relatively low average and marginal borrowing costs. For lower rated countries face relatively low average borrowing costs but higher marginal costs.

Let me conclude it Honorable Justice, issuance of Eurobond could work but it would effectively mean the German tax payers taking in a lot of responsibility. If you want to keep Euro strong you cannot let other European members default. The failing of the Euro will surely lead to the failing of the European Union. It is important for Germany to help the EU out because the collapse of the state could have a drastic effect on Germany even with a stable economy. I hope that you better understand this overall concept.

Thank you very much for your kind attention to these issues Honorable Justice.

Sincerely,

Athinarayanan Sanjeevraja.