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05 June 2012

WSJ: Germany grapples with role in rescue


With Greece's euro membership hanging by a thread, Spain's banking system in deep trouble and concerns about Italy mounting, the German government must decide whether saving the euro is worth putting the country's own prosperity at risk.

Critics of Germany's approach to the crisis, including France and Italy, have said that its strategy of trying to rebuild confidence by imposing harsh austerity measures on Greece and other countries has compounded the crisis, not eased it.

This week, with the crisis worsening, Ms Merkel softened her stance, suggesting that the continent's largest financial institutions be placed under direct European Union supervision. Her remarks came after other German officials signalled that they may eventually accept eurobonds or similar measures if European governments submit to centralised fiscal controls.

Still, Ms Merkel stopped short of endorsing more ambitious plans to safeguard the region's financial system or agreeing to let Spanish banks tap the eurozone's bailout fund. German officials say any compromise would be contingent on eurozone members agreeing to tougher, centralised fiscal controls, part of Ms Merkel's recent call for "more Europe, not less Europe".

The deeper fiscal and political integration this would entail are distant goals that many economists and policy-makers say may never be realised if Ms Merkel doesn't take bold action soon.

Full article



© Wall Street Journal


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