Fiscal responsibility is good, and I wish we could write a balanced budget amendment in to our constitution here in the United States.
The problem with Greek austerity measures is that they have not worked to restore confidence in Greece and stabilize the interest Greece owes on its debt:
So the Greek government is not any closer to being able to pay its own way.
Austerity measures are working much better for the Italians, though, whose bond yeilds have fallen below 6%
For comparison's sake, here is the German bond yield.
Germany can borrow money much more inexpensively than the Italians or Greeks, due to the perceived strength of the German economy. Do you really want to tie German bond rates to those of the Italians and Greeks? Germany with 6 or 7% interest payments is in worse shape than Italy.
I can see why Merkel is unwilling to do this. The Germans risk more, and have much less to gain than the others do.
I would not allow it, if I were Germany.
Also, how in the world would a Eurobond be administered? Who decides how many bonds are sold? Who gets the proceeds from the bond sales? I can imagine the fighting. The difference between the United States Treasury selling bonds and some entity of the European Union is that the United States is one government, and Europe is many governments with their own interests.
Eurobonds would inevitably lead to even more interdependence among Eurozone nations, and a loss of even more national sovereignty for member states.
I could see an argument being made that pooling bond markets together could decrease borrowing costs for everybody. However, this may only be short term. Inevitably, the stronger nations like Germany would by tying their fate to nations like Spain and Greece. The debt brake is one safeguard, and certainly had to be implemented before a eurobond ever could.
However, maybe it is my mistrust for politicians, but I don't see all 17 countries abiding by the debt brake for long. If they fail to do this, just consider that one nation such as Greece lying about their budget could have much bigger negative consequences for a nation like Germany under the Eurobond system than it currently does.