Germany’s Support Withers as Euro Panic Worsens
How long can German Chancellor Angela Merkel stand alone against the other 16 Eurozone countries, the wider European Union community, global stock markets, and global bond markets?
Yields on ten-year Italian bonds over 7%—as level that everyone calls unsustainable. Yields on ten-year Spanish bonds approaching 7% in today’s auction. Yield spreads between French and German ten-year bonds rising to 2 percentage points, a level not seen since the introduction of the euro. Yields on Austrian and Dutch bonds rising as that debt too comes under pressure.
The cry to unleash the European Central Bank is coming from all corners of Europe—except for Germany.
In Berlin today, Merkel lumped large-scale bond buying by the European Central Bank together with new euro bonds and a debt cut as proposals that won’t work.
“I’m convinced that none of these approaches, if applied right now, would bring about a solution of this crisis,” Merkel said. “If politicians believe the ECB can solve the problem of the euro’s weakness, then they’re trying to convince themselves of something that won’t happen.”
I actually think Merkel is right. None of these steps would “solve” the euro debt crisis. That will take something like the changes to the euro treaty and the deeper political union for euro countries that she has proposed—plus years of economic reform in currently uncompetitive Eurozone economies such as Italy.
But being right doesn’t count for much when the house is burning down around you. Europe’s political leaders are in close to panic mode.
Today, outgoing Spanish Prime Minister Jose Luis Rodriguez Zapatero called on the European Central Bank to act immediately.