Germany pushes euro peers as crisis goes global

7th May 2010, Comments 0 comments

Euro powerhouse Germany demanded tough new rules of its currency partners after the Greek debt crisis brought down global markets on Friday and triggered alarm from the United States to Asia.

As markets hammered euro leaders' handling of the crisis, growing concerns in the US, Japan and Canada were relayed via the G7 forum to France, Germany, Italy and non-eurozone Britain, which is itself heavily indebted.

US President Barack Obama himself spoke with German Chancellor Angela Merkel, calling for a "strong policy response" extending to the wider "international community."

Obama's Treasury Secretary Timothy Geithner meanwhile conducted an emergency G7 conference-call, Dow Jones Newswires reported, as fears spread that a domino effect spinning out from Athens could ultimately threaten global recovery.

In a bid to send a fresh "message" to markets -- that have so far been resolutely unimpressed with the EU's handling of the crisis -- euro leaders were being asked at an evening summit in Brussels to commit to deeper cuts among "additional measures, if necessary" to keep public deficits within planned limits, an EU source told AFP.

Merkel said Greece should not be the only euro nation to reduce its deficits, and that she would even pursue European Union treaty changes in a bid to impose rules that were properly respected.

Currently 13 of the 16 currency partners are under excessive deficit surveillance by a European watchdog, having breached guidelines laid down in that agreement, which dates from the euro's creation.

In other moves, leaders were expected to call for a permanent "crisis resolution" mechanism, which some want to take the form of a fund for Greek-style bailout action in future, plus a "rapid" push for tough new regulation and supervision of speculators.

In Madrid, Spain's deputy prime minister Maria Teresa de la Vega indicated earlier that the current EU chair would push for curbs, including criminal charges, against "anti-social" speculators she said had "toyed with" her country's prestige.

Merkel may have the financial clout, but she was unlikely to get all her own way on an ambitious set of Berlin demands when delayed formal talks got under way at 8:00 pm (1800 GMT).

Austrian counterpart Werner Faymann said it was unrealistic to contemplate treaty changes at the moment, saying Europe could think about such things after the debate was over, "not as it is just starting."

He also viewed with scepticism a German initiative to withdraw voting rights from fiscal laggards and warned that "not everyone is convinced" by Merkel's desire to create a European ratings agency.

The Austrian chancellor said that the leaders should ask "why are we put under such pressure by the speculators?"

The main plank of the summit was to sign off on an unprecedented 110-billion-euro (145-billion-dollar) bailout, with the IMF, for debt-laden Greece.

Australian Prime Minister Kevin Rudd said markets had already judged Greek bailout action "inadequate" after stocks plummeted in Asia and on Wall Street, the euro plumbed a 14-month low against the dollar and Japan said it would plough more than 20 billion dollars into shaken Asian financial markets.

The three biggest contributors, Germany, France and Italy, each secured domestic approval for their share of the package -- worth more than bankrupt Argentina's bailout in the 1990s.

Italian Foreign Minister Franco Frattini, in Milan, said the "credibility not only of the euro, but of Europe" was at stake.

The moves come amid predictions from leading global economists that the currency union could collapse.

Slovenia and Slovakia, two of the eurozone's newest members, said countries that violate rules should be expelled.

Greek lawmakers approved fierce belt-tightening measures late on Thursday, in the face of widespread unrest that claimed three lives in a firebombed Athens bank the previous day.

As he arrived at the Brussels summit venue, Greek Prime Minister George Papandreou said the summit would "reaffirm our confidence in our economies and in our common currency."


© 2010 AFP

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