Arab Today, arab today germany heading for isolation over ecb euro rescue role
Last Updated : GMT 10:54:12
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Germany heading for isolation over ECB euro rescue role

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Arab Today, arab today Germany heading for isolation over ECB euro rescue role

London - AFP

Germany faced mounting pressure Sunday to let the European Central Bank (ECB) save the euro, as France fretted on reports of IMF contingency bailout planning for a re-modelled Italy. With bond market vultures circling even gold-plated economies and Italy\'s La Stampa daily citing IMF officials on a rescue plan worth up to 600 billion euros ($794 billion), another of Germany\'s closest allies broke ranks, leaving Berlin isolated. Amid predictions that the common currency faces its death throes within weeks failing radical intervention, Austria joined Finland in backing ECB action to stem the financial market contagion threatening Italy, Spain and even France. The pressure has intensified since Germany itself struggled to raise public finance on commercial money markets last week. \"The European Central Bank could perform a more powerful role, as in the United States,\" Austrian Prime Minister Werner Faymann said, also giving his support to the creation of commonly-issued eurobonds. \"It could itself buy states\' bonds,\" he said on the sidelines of a congress of European Socialist parties in Brussels. CLearly the race is on to prevent interest rates for Italy or Spain from skyrocketing to the levels that forced Greece, Ireland and Portugal to accept multi-billion bailout EU-IMF loans. The scope for direct ECB action at primary level, as long sought by US, British and other G7 partners among the world\'s most powerful economies, will be the unspoken nub of euro finance ministers\' talks on Tuesday night in Brussels. Finland\'s finance minister Jutta Urpilainen said Friday: \"I think we have seen that if there is nothing else left then we can think about strengthening the role of the ECB.\" In Strasbourg last week for a mini-summit with France and Italy, German Chancellor Angela Merkel said politicians should not intervene in ECB decision-making. \"The French president has just underlined that the European Central Bank is independent,\" she said, but a smiling Nicolas Sarkozy interjected: \"All three of us said that with respect for the independence of this institution, one should refrain from positive or negative demands of the ECB.\" The Financial Times Deutschland interpreted that exchange as proof that France, the most vociferous eurozone backer of a turbo-charged ECB role at the heart of the continent\'s politics, was winning the day. \"By committing to silence, Merkel and Sarkozy are freeing the ECB to make a more forceful intervention in the crisis,\" it said. A French government source said pressure has been piled on Merkel for months, citing the meeting alongside new Italian premier Mario Monti and an invitation for US President Barack Obama to join a huddle in Cannes during a G20 summit last month. In Paris\' view, unless Merkel turns completely, not even Germany will be able to withstand market pressures. \"The idea was to point out to Merkel that, even Monti, who is willing to go much further than Berlusconi was in reforming Italy, won\'t make it without ECB intervention -- the way all other central banks act,\" said the source. The IMF loans, at rates of 4.0 percent or 5.0 percent, would give Monti a window of 12 to 18 months to implement urgent budget cuts and growth-boosting reforms \"by removing the necessity of having to refinance the debt,\" La Stampa quoted an IMF official as saying. \"If there is an Italian problem, then it is the heart of the eurozone that is hit,\" said a statement from Sarkozy\'s office. \"It is up to Italy to do what it has undertaken to do.\" As it emerged that Britain\'s banks were drawing up contingency plans for the possible dismantling of the eurozone, Monti\'s press office said Friday that Sarkozy and Merkel agreed in Strasbourg that a debt collapse in Italy would be \"the end of the euro.\"  

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