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.
Merkel’s speech did not represent a significant departure from Germany’s already-stated position, and markets appeared optimistic that the Germans would yet be more flexible than her words suggested. In addition, the kind of agreement the European leaders appeared to be coalescing around could solidify the foundations of the euro in the long term and would have been unthinkable without the urgency created by the crisis. Stock indexes across Europe rose Friday.
Merkel sought to dispel fears of Berlin’s growing dominance in the region, calling such concerns “absurd.” Rather, she said, Germany and Europe together were heading toward a “new phase in European integration.”
She bluntly spelled out that the ECB — which a bloc of nations, including France, would like to see engage in large-scale efforts to calm investors by buying up troubled country debt and relax rules for bank lending — has a narrower mission than the U.S. Federal Reserve and the Bank of England. She also reiterated the ECB’s “independence,” suggesting that it would not be helpful to offer “praise or criticism” of its actions.
Merkel’s comments came a day after the head of the ECB signaled that it might be willing to take more aggressive steps to stem the region’s debt crisis, as long as the euro-zone nations agree to bind themselves more closely in a fiscal union to tame years of runaway spending.
By calling for a E.U. treaty change, or even a new treaty, rather than, say, a series of bilateral accords between the countries that share the euro, Merkel and Sarkozy could be opening a Pandora’s box. Such a move, as Merkel said, could take years to come into effect. It could also require sign-off by not only the 17 nations that share the euro, but also all 27 members of the European Union, including nations such as Britain where anti-Europe feelings are running high.
Potentially laying the groundwork for such a sweeping deal, Britain’s Prime Minister David Cameron met with Sarkozy in Paris on Friday. In brief comments after the meeting, Cameron signaled that it was in Britain’s interest to see a quick resolution to the euro crisis. But he also said, “if there is a treaty change, I will make sure we further protect and enhance British interests.’’
“We’re witnessing the creation of a kind of German zone” in Europe, Bill Cash, a Conservative lawmaker and longtime euro critic, told the BBC. “This is very much not in the interest of the United Kingdom.”
Correspondent Edward Cody in Paris contributed to this report.