LONDON — German Chancellor Angela Merkel warned Friday that the only real solution to Europe’s debt crisis was a drawn-out effort to alter or create new European Union treaties to punish big-spending nations, a process that will take years.
It remained unclear whether Germany, the largest and most economically powerful among the 17 countries that share the euro, would also back short-term action to contain the crisis, including possible dramatic new moves by the European Central Bank. Merkel offered no clarity on market hopes that Berlin would drop its resistance to the ECB deploying more financial firepower if the region’s leaders agree to a historic fiscal accord at a summit next week.
European Central Bank chief Mario Draghi has hinted that the bank was ready to play a bigger role in the resolution of Europe's debt crisis, but only after the 17 countries that use the euro currency tether their economies more tightly together. (Dec. 1)
Merkel has emerged as the most central political figure in Europe’s debt crisis, not least because Germany has the power to make or break any effort to calm the turbulence and save the currency union. She is confronting growing resentment from nations such as Greece, where the public is smarting from a harsh austerity campaign imposed as the terms of a bailout. At the same time, she is attempting to manage Berlin’s rise, as a result of its vast purse strings, to being the most dominant political voice on the European stage.
She is also facing a growing backlash at home against fresh commitments by fiscally conservative Germany to prop up its more profligate neighbors, leaving her toeing a line between a desire to shore up a common currency union she sees as central to maintaining peace and prosperity in Europe while not jeopardizing her own standing at home.
Merkel’s statements Friday seemed to underscore the gap between Berlin’s long-term timeline for a cure for the crisis and the immediacy being demanded by investors. She did call for rapid steps to forge agreements that could, over time, control overspending, but suggested there was no quick fix to the region’s debt woes that have been rattling global markets for the past two years.
“The German government has made it clear that the European crisis will not be solved in one fell swoop,” Merkel told Parliament in Berlin. “It’s a process, and that process will take years.”
Echoing the words of French President Nicolas Sarkozy on Thursday, Merkel said there was only one real answer to a crisis that is threatening to tear the region’s currency union apart. She called for accelerated European integration through a fiscal union, or a pact that could ultimately have Italy, Spain, France, and Germany effectively forfeit full independence over national budgets and potentially give their neighbors the right to slap penalties on overspenders. Merkel and Sarkozy are expected to unveil a Franco-German plan for such a pact Monday, ahead of a European leaders’ summit in Brussels.
Until such a pact is up and running, she suggested, Germany would resist calls for at least one possible solution to the crisis: the notion that German taxpayers could be asked stand behind shaky nations such as Greece and Italy if the ECB were to sell “eurobonds,” similar to U.S. Treasuries.