Saving the Common Currency: German Obstructionism Heightens Euro Fears

By

Part 4: Merkel's Plan

German Chancellor Angela Merkel is under fire in Europe these days for her opposition to plans aimed at propping up the euro. Zoom
REUTERS

German Chancellor Angela Merkel is under fire in Europe these days for her opposition to plans aimed at propping up the euro.

Both German Chancellor Angela Merkel and her coalition partners from the business-friendly Free Democrats have insisted that any long-term debt mechanism must not be made up exclusively of carrots, but needs a stick as well to encourage stricken countries to clean up their public finances. As such, Merkel would like to see a post-2013 crisis mechanism allowing for national bankruptcies within the euro zone.

Her plan calls for International Monetary Fund involvement as well as strict conditions being imposed on any countries in need of financial assistance. Furthermore, private creditors would be involved in debt restructuring "on a case by case basis" -- meaning that investors stand to lose.

Originally, Merkel's concept included a mandatory involvement of creditors in all cases as well as the suspension of European voting rights for the countries in question. Following talks with French President Nicolas Sarkozy, however, Merkel backed off from some of her more severe demands.

Still, her public musing about the involvement of creditors in national bankruptcies did little to increase confidence in the euro. Many lost sight of the fact that her plan was only to take effect once the EFSF expired in 2013, and investors began a massive sell-off of Irish debt that led to a worsening of the euro crisis.

The blunder opened Merkel to criticism that she is not the committed European she claims she is. Germany's leading opposition party, the center-left Social Democrats, accused her on Wednesday of turning her back on Europe.

Similar criticism has come from elsewhere as well. "The direction of the EU must be supported by all 27 together and must not be dictated by the big countries," Luxembourg Foreign Minister Asselborn said on Wednesday.

Article...
  • For reasons of data protection and privacy, your IP address will only be stored if you are a registered user of Facebook and you are currently logged in to the service. For more detailed information, please click on the "i" symbol.
  • Post to other social networks

Keep track of the news

Stay informed with our free news services:

All news from SPIEGEL International
Twitter | RSS
All news from Europe section
RSS

SPIEGEL ONLINE 2010
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH




Photo Gallery
Graphics Gallery: The Euro Crisis in Numbers
Graphic: How Euro-bonds would work. Zoom
DER SPIEGEL

Graphic: How Euro-bonds would work.



European Partners
Presseurop

Politiken

Corriere della Sera

One Million Erasmus Babies

ASEM Summit Paralyses Milan


Facebook
Twitter