Plan Asmussen

YOU can say many things about Jörg Asmussen, but he's a brave man. Yesterday evening, the state secretary at the finance ministry, who is the government’s point-man on the euro crisis, allowed himself to be publicly grilled in Berlin by an assorted panel of financial experts at Heinrich Böll Stiftung, a Green-leaning political foundation.Before the heavy punching started, he got in one thing: “There is no euro crisis, it’s a government debt crisis. The euro is stable.”The moderator kindly made it clear that Mr Asmussen was speaking as a state secretary—and not as chief economist of the European Central Bank (a post he will take up shortly), nor as an intellectual or a private citizen.It did not come as a surprise then that Mr Asmussen firmly stuck to the government line, which—at the time of writing—remains that the European Central Bank (ECB) must not become a lender of last resort with unlimited appetite for government bonds. Nor must the European Financial Stability Facility (EFSF) be given a banking licence so that it can do that job for the ECB.Daniela Schwarzer of the German Institute for International and Security Affairs, a foreign-policy think-tank, did not believe the EFSF would ever manage to get the leverage Europe’s leaders want it to have. “That means we will need access to ECB money, we need to think about that step,” she said.Intervention by the ECB was far from the best remedy, she added, because it buys bonds without imposing sanctions. An EFSF which rationed countries’ access to funds would be offering carrots rather than sticks.Gerhard Schick, in charge of financial policy for the Greens, argued that giving the EFSF a banking licence would be far better than giving it leverage. He also praised a recent proposal by Germany’s five-person Council of Economic Experts to set up a mutually guaranteed redemption fund for that part of euro-zone government debt that exceeds the threshold of 60% of GDP. “Like any crisis, it’s about burden-sharing.”Inevitably that led to the question of Eurobonds—bonds guaranteed by the entire euro zone. They are seen as a way to calm market speculation about individual countries’ ability to repay their debt. They could also pave the way for Italy and other countries to pay lower interest on refinancing their debt mountains.“There are 25 versions on the table,” countered Mr Asmussen and added that “the introduction of eurobonds would not be helpful.” He pleaded for the current plans outlined at various summits to be given a chance: addressing the debt problems of a few euro-zone countries and increasing their competitiveness.“What is plan B?” asked a journalist from Tageszeitung, a leftish daily.Mr Asmussen would not be drawn: “If you speculate about plan B, then plan A is kaput.” Plan A rests on five factors, all of which have to be in place, he said: a plan for debt resolution and growth for Greece; the prevention of contagion to Spain and Italy; creating a firewall by getting banks to mark down their holdings of government bonds and add more capital; building another firewall with the EFSF; and, finally, setting a road-map for deeper monetary union.Easy.Nobody really expected Mr Asmussen to discuss plan B. Nor was he likely to reveal his innermost thoughts. But so cleverly did he speak that there will be no loss of face one day when the government rolls out plan B.