Berlin Remains Stoic in the Face of Growing Crisis

Spiegel
December 15, 2011

Not even a week after the most recent European Union summit aimed at ending the debt crisis, panic is mounting once again. But not in Berlin. Chancellor Merkel calmly told parliament on Wednesday that a solution would take years and German central bank head Jens Weidmann compared demands for ECB intervention to an alcoholic grabbing for the bottle.

One wishes that financial investors were made of the same stuff as German Chancellor Angela Merkel. With virtually the entire world convinced that the euro zone has not done enough to save the common currency, Merkel remains stoic in the face of demands to erect a gigantic firewall. On Thursday, she ruled out increasing the size of the permanent euro backstop fund, the European Stability Mechanism, beyond the currently planned €500 billion ($648.5 billion).

"The German government has always made it clear that the European debt crisis is not to be solved with a single blow," she told German parliamentarians one day earlier. She said that overcoming the debt crisis would take years and made a plea for patience and endurance.

It would appear, however, that not many are listening. This week has seen several indications that financial markets are by no means impressed with the results of last week's European Union summit. At the meeting, 26 EU member states agreed to move forward with fiscal integration, while Great Britain was left out in the cold.

Less than a week later, however, a cacophony of voices has begun once again calling for immediate action to restore confidence in the common currency. "Ideally, I would like to see a very clear declaration from the European Central Bank that it is prepared to do whatever is necessary to save the currency, and it is the ultimate backstop," said Irish European Affairs Minister Lucinda Creighton on Wednesday. "Having a fiscal compact in place by March is desirable, but I don't think it's going to save the euro."

Klaas Knot, head of the Dutch Central Bank and an ECB board member, suggested that it was European leaders who need to make the next move. He said that the debt crisis could be solved if the euro zone would boost its financial rescue fund to €1 trillion.

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