May 20, 2012
European leaders are drawing up a series of crisis-fighting proposals to raise at an informal EU summit this week that have in the past been rejected by Germany putting further pressure on Chancellor Angela Merkel.
The proposals, which could include empowering the eurozone’s €500bn rescue fund to directly recapitalise faltering European banks and commonly backed eurozone bonds, have been backed by some leaders in the past but forced off the agenda by the German chancellor’s objections.
The discussions have gained urgency amid signs of stress in parts of the banking system that some analysts have likened to a slow motion bank run.
Their resurrection is the latest sign François Hollande’s election in France has shifted the terms of the eurozone crisis debate, giving advocates of such measures – who include José Manuel Barroso, president of the European Commission, and Mario Monti, Italian prime minister – a powerful new ally.
It also reflects the growing belief among some leaders that instability in Greece necessitates revisiting the crisis procedures to ensure they are sufficient to deal with a Greek eurozone exit.
“If we let Greece go down, the ring fence for the rest of the eurozone will [have to] be much more solid,” said one senior politician involved in the deliberations.
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