Support for eurobonds could cost Merkel's job, says coalition partner

The German Chancellor Angela Merkel faced dire political warnings from her liberal Free Democrat coalition partners yesterday that a German pledge of support for eurobonds at today's euro crisis summit in Paris would risk the fall of her government.

The stark alternative was spelled out by the liberals as Ms Merkel simultaneously faced mounting global and European pressure to drop her country's opposition to eurobonds as they were considered the "only way out of" the euro crisis.

Despite several reports to the contrary, Ms Merkel is still officially opposed to eurobonds. She has decided to make today's meeting with the French President Nicolas Sarkozy her first official duty since returning from holiday in Italy and has doggedly refused to comment on the issue.

But the Chancellor's Free Democrat coalition partners yesterday insisted eurobonds would be "fundamentally wrong" for Germany and warned his party would "have to ask whether the coalition still had a future" if the Chancellor signed up to the idea.

A German government spokesman attempted to play down the importance of today's summit and insisted there were "no indications" eurobonds would be discussed. "We don't think they are the right solution," the spokesman said.

But outside Germany, government ministers and financial experts appeared to be queueing up to support the eurobond. The financier George Soros joined Italy's Finance Minister Giulio Tremonti in giving his unequivocal backing to the idea. In an interview with Der Spiegel magazine, Mr Soros said he was convinced that eurobonds were "the only way out".

After weeks of euro-inspired turmoil, yesterday's markets opened calmly with modest gains across the Continent, as well as in the UK.