The growing gap between the euro zone’s two core powers has raised a question, particularly for the Germans: How far are they willing to go to save the euro?
To date, every attempt by Europe’s leaders to quell their fiscal emergency has fallen flat, and the region may be running out of time. With debt woes spreading beyond near-bankrupt Greece and Italy, the bailout fund established to prop up troubled nations is now seen as too little, too late. A plan to bolster that fund has fallen prey to market fears.
That, experts say, has left the Europeans with dwindling options.
At the center of the debate is whether the European Central Bank should fire up its printing presses, creating euros that would guard against a potential string of government defaults in the region.
But the ECB, which acts as the central bank for the 17 countries that share the euro, has always been conservative, in part because Germany has bitter memories of Depression-era hyperinflation.
With France, the region’s second-largest economy, seeing its borrowing costs rise this week to the highest level in 14 years, the alarmed government in Paris is calling for the bank to quickly shed that conservative nature.
“The ECB’s role is to ensure the stability of the euro but also the financial stability of Europe,” French Budget Minister Valerie Pecresse said Wednesday in Paris. “We trust that the ECB will take the necessary measures to ensure financial stability in Europe.”
In their public remarks, German officials are holding firm to a narrow role for the central bank, despite the region’s worsening conditions. Speaking in Berlin, German Chancellor Angela Merkel publicly reasserted Germany’s position that the bank’s governing rules prevent it from bailing out nations or playing a more active role in crisis containment.
“The ECB doesn’t have the possibility of solving these problems,” Merkel said, adding, “We still don’t have an adequate answer about the future of the euro zone.”
Merkel has been stuck between rapidly deteriorating markets and a German public that is dead set against being made responsible for the debts of others. Punctuating those fears, Philipp Roesler, the economics minister, took to German television last week to reassure Germans and put down rumors that the nation’s gold reserves might be tapped to solve the crisis.
At a political convention this week, Merkel said the debt crisis was “maybe Europe’s most difficult hours since World War II.” Her party agreed to push for changes to bolster economic integration in the euro zone, unthinkable in Germany just a year ago.