October 7, 2011
How should the euro zone solve its currency crisis? European capitals are currently preparing to inject fresh capital into their banks with some economists arguing that saving financial institutions would be cheaper than propping up entire countries.
How much longer will the euro zone be patient with Greece? A growing number of politicians and economic experts are criticizing the rescue packages for the overly indebted nation and are instead demanding that Greece be allowed to slide into insolvency. Paris and Berlin continue to hold back. But, to be on the safe side, they are already preparing their domestic banks for a possible Greek default.
On Tuesday, European Union finance ministers discussed plans to provide state capital to shore up Europe's major banks. And during its regularly scheduled interest rate meeting on Thursday, the European Central Bank (ECB) committed significant sums of money to come to the aid of financial institutions. ECB President Jean-Claude Trichet warned European governments to ensure that their banks were sufficiently capitalized.
In Germany, Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) has been clear in her support of this position. On Wednesday, together with European Commission President Jose Manuel Barroso, she announced her preparedness to support a bank bailout. Following a meeting of the heads of the most important international economics and financial institutions, the chancellor reiterated her position on Thursday, saying that if banks urgently need money, the European states should "not delay" in providing financial aid. That, she said, would be "intelligently invested money."
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